Transforming Wartime Contracting: Recommendations of The Commission On Wartime Contracting

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S. Hrg.

112333

TRANSFORMING WARTIME CONTRACTING:


RECOMMENDATIONS OF THE COMMISSION
ON WARTIME CONTRACTING

HEARING
BEFORE THE

COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
SEPTEMBER 21, 2011

Available via the World Wide Web: http://www.fdsys.gov/


Printed for the use of the
Committee on Homeland Security and Governmental Affairs

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WARTIME CONTRACTING2011

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S. Hrg. 112333

TRANSFORMING WARTIME CONTRACTING:


RECOMMENDATIONS OF THE COMMISSION
ON WARTIME CONTRACTING

HEARING
BEFORE THE

COMMITTEE ON
HOMELAND SECURITY AND
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
SEPTEMBER 21, 2011

Available via the World Wide Web: http://www.fdsys.gov/


Printed for the use of the
Committee on Homeland Security and Governmental Affairs

(
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON

72481 PDF

2012

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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS


JOSEPH I. LIEBERMAN, Connecticut, Chairman
SUSAN M. COLLINS, Maine
CARL LEVIN, Michigan
TOM COBURN, Oklahoma
DANIEL K. AKAKA, Hawaii
SCOTT P. BROWN, Massachusetts
THOMAS R. CARPER, Delaware
JOHN MCCAIN, Arizona
MARK L. PRYOR, Arkansas
RON JOHNSON, Wisconsin
MARY L. LANDRIEU, Louisiana
ROB PORTMAN, Ohio
CLAIRE MCCASKILL, Missouri
JON TESTER, Montana
RAND PAUL, Kentucky
MARK BEGICH, Alaska
JERRY MORAN, Kansas
MICHAEL L. ALEXANDER, Staff Director
TROY H. CRIBB, Senior Counsel
CARLY A. STEIER, Professional Staff Member
NICHOLAS A. ROSSI, Minority Staff Director
J. KATHRYN FRENCH, Minority Director of Governmental Affairs
CLYDE E. HICKS, Minority Professional Staff Member
TRINA DRIESSNACK TYRER, Chief Clerk
PATRICIA R. HOGAN, Publications Clerk
LAURA W. KILBRIDE, Hearing Clerk

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CONTENTS
Opening statements:
Senator Lieberman ...........................................................................................
Senator Collins .................................................................................................
Senator Tester ..................................................................................................
Senator Coburn .................................................................................................
Senator Levin ....................................................................................................
Prepared statements:
Senator Lieberman ...........................................................................................
Senator Collins .................................................................................................

Page

1
2
16
19
22
49
52

WITNESSES
WEDNESDAY, SEPTEMBER 21, 2011
Hon. Claire McCaskill, a U.S. Senator from the State of Missouri .....................
Hon. Jim Webb, a U.S. Senator from the State of Virginia .................................
Hon. Christopher Shays, Co-Chair, accompanied by Hon. Clark Kent Ervin,
Hon. Robert J. Henke, Katherine Schinasi, Charles Tiefer, and Hon. Dov
S. Zakheim, Commissioners, Commission on Wartime Contracting in Iraq
and Afghanistan ...................................................................................................
Hon. Patrick F. Kennedy, Under Secretary for Management, U.S. Department
of State ..................................................................................................................
Richard T. Ginman, Director, Defense Procurement and Acquisition Policy,
U.S. Department of Defense ................................................................................
ALPHABETICAL LIST

OF

4
6

8
33
35

WITNESSES

Ginman, Richard T.:


Testimony ..........................................................................................................
Prepared statement ..........................................................................................
Kennedy, Hon. Patrick F.:
Testimony ..........................................................................................................
Prepared statement ..........................................................................................
McCaskill, Hon. Claire:
Testimony ..........................................................................................................
Prepared statement ..........................................................................................
Shays, Hon. Christopher:
Testimony ..........................................................................................................
Joint prepared statement .................................................................................
Webb, Hon. Jim:
Testimony ..........................................................................................................
Prepared statement ..........................................................................................

35
90
33
71
4
54
8
63
6
57

APPENDIX
Professional Services Council, prepared statement ..............................................
Responses to post-hearing questions for the Record from:
Mr. Shays ..........................................................................................................
Mr. Kennedy .....................................................................................................
Mr. Ginman .......................................................................................................
Transforming Wartime Contracting: Controlling costs, reducing risks, Commission on Wartime Contracting in Iraq and Afghanistan, Final Report
to Congress, August 2011 ....................................................................................

116
123
145
166
183

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TRANSFORMING WARTIME CONTRACTING:


RECOMMENDATIONS OF THE COMMISSION
ON WARTIME CONTRACTING
WEDNESDAY, SEPTEMBER 21, 2011

U.S. SENATE,
ON HOMELAND SECURITY
AND GOVERNMENTAL AFFAIRS,

COMMITTEE

Washington, DC.
The Committee met, pursuant to notice, at 2:30 p.m., in room
SD342, Dirksen Senate Office Building, Hon. Joseph I. Lieberman, Chairman of the Committee, presiding.
Present: Senators Lieberman, Levin, Carper, McCaskill, Tester,
Collins, and Coburn.
OPENING STATEMENT OF CHAIRMAN LIEBERMAN

Chairman LIEBERMAN. Good afternoon. The hearing will come to


order.
Let me start by welcoming the members of the Commission on
Wartime Contracting (CWC) in Iraq and Afghanistan and, of
course, our colleagues, Senator McCaskill and Senator Webb.
I am going to put my whole statement in the record 1 and just
draw briefly from it in deference to Senator Collins, who has an
Appropriations meeting she has to go to, and to our two colleagues.
The Commission on Wartime Contracting was created by legislation sponsored by Senator Claire McCaskill and Senator Jim Webb
to investigate our reconstruction efforts in Iraq and Afghanistan.
Last month, the Commission issued its finaland I would say to
me very disturbingreport because it says that at least $31 billion,
and maybe as much as $60 billion, have been squandered in waste,
fraud, and abuse in Iraq and Afghanistan over the past 10 years.
And those are obviously $31 to $60 billion taxpayer dollars.
I supported the wars in Iraq and Afghanistan. I still do. I support the aggressive rebuilding efforts in both of those nations, and
I still do. And, of course, I believe that the ultimate waste of money
and of the service and sacrifice made by our men and women in
uniform would be to walk away and let Iraq and Afghanistan fall
back into the hands of dictators and/or Islamist fanatics.
But that is not only an excuse, but even more reason why I am
so upset by the findings of the Commission, which are basically
how sloppy and irresponsible so much of the spending was. Some
of the examples particularly drove up my blood pressure, and I did
not have medication nearby so it was particularly harmful.
1 The

prepared statement of Senator Lieberman appears in the Appendix on page 49.

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U.S. tax payers paid $300 million to build a power plant in
Kabul, Afghanistan, that would supply the city with electricity
around the clock, and the whole idea here wasbuild it, they will
come, spur economic development. But the Afghan Government
could not afford the fuel to run the plant and instead contracted
to buy electricity from Uzbekistan at a fraction of the price, and
the power plant built with 300 million American dollars is now just
an expensive backup generator.
Another one that I thought was particularly outrageous was that
$40 million of our money went to build a prison in Diyala Province
in Iraq that the Iraqis said they did not want and ultimately refused to take possession of. The project was not only never completed; it was abandoned with $1.2 million worth of materials left
at the site. So the Commission report tells us.
Much of the waste identified by the Commission stems from a
lack of competition, which, of course, should be the cornerstone of
government contracting.
I will say finally that perhaps my greatest frustration reading
the Commissions report is a general one, which is that the underlying problems it identifies are not problems of first instance for us.
In various ways we have seen these kinds of problems for years.
And, in fact, at different times Congress has enacted reforms legislatively that were suppose to address these problems. And yet here
comes this Commission report showing that billions of dollars nonetheless were wasted.
So my response to the report is to thank the Commissioners who
we will hear from next for their extraordinary work, and also to see
if we can together find a way notbecause we are too experienced,
unfortunatelyto believe we can stop all waste and fraud forever,
but we can sure do a better job than we are doing now, and I hope
together we can find some ways based on this report to help make
that happen.
Senator Collins.
OPENING STATEMENT OF SENATOR COLLINS

Senator COLLINS. Thank you, Mr. Chairman.


Let me join the Chairman in thanking the Commission members
for their report and the two authors of the legislation that established the Commission. Along with Senator McCaskill and Senator
Webb, I testified at the very first hearing of the Commission on
Wartime Contracting. At that time I noted that there are four categories of problems that lead to contingency contracting failures:
First, unclear and evolving contract requirements; second, poor
management, including an inadequate number of skilled contracting personnel; third, an unstable security environment; and,
fourth, a lack of commitment by the host government officials to
the reconstruction of their own country.
Unfortunately, the Commission has documented all of these
problems and more in our Nations wartime contracting efforts. It
is especially troubling that our operations in Iraq and Afghanistan
have been plagued by such a high level of waste, fraud, and abuse.
Some of the examples are almost too astonishing to believe. For
example, a July 2011 report by the Special Inspector General found
that a Department of Defense (DOD) contractor was charging $900

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for a control switch that was worth a mere $7. In some cases, the
inspector general (IG) found contractors overbilling the government
with markups ranging from 2,300 percent to more than 12,000 percent. Now, I think we all understand that when you are contracting
in this environment, there is going to be some kind of premium,
but this was absurd.
One solution to this problem is the establishment of a professional acquisition cadre. That is why I authored an amendment to
the fiscal year 2009 defense authorization bill to create a contingency contracting corps. This year, I have introduced two bills designed to further strengthen the governments acquisition workforce: The Federal Acquisition Institute Act and the Federal Acquisition Workforce Improvement Act.
I want to emphasize a point that was raised by one of the Commissioners at a recent briefing about the report. Congress should
either enhance and improve the acquisition workforce to handle
these types of massive contingency operations, or we should
rethink whether or not we want to run these massive operations.
We simply cannot justify doing major contracting without the necessary supporting workforce, as the findings of the Commissions
report highlight today.
This is a point that I think often gets lost in the discussion of
contingency contracting. The billions spent for development and big
infrastructure contracting were invested in order to support counterinsurgency efforts by winning hearts and minds of the population and by establishing security. But with so many disappointing
results, Congress should ask: Are we fulfilling our obligations to
the American taxpayers who are footing the bill for these projects?
And should we really be surprised at the problems arising from
attempts to run major development programs and embark on large
infrastructure construction while we are in the middle of a war
zone?
The past 10 years have taught us that we need to spend more
time focusing on these broader questions before we get into another
contingency operation if we hope to avoid repeating the mistakes
of the past.
As I stated at the very first Commission hearing, How well we
execute wartime contracting helps to determine how well we build
the peace. In my view, we canand mustdo better.
Again, I want to thank the Chairman for convening this hearing
and apologize to our witnesses that I do have to leave shortly for
an Appropriations markup. Thank you.
Chairman LIEBERMAN. Thanks, Senator Collins. We understand
very well.
Thanks to Senator McCaskill and Senator Webb for being here.
It actually was the problems with wartime contracting which were
part of the reason why we created an ad hoc Subcommittee on Contracting Oversight of this Committee to oversee Federal contracting
and why I asked Senator McCaskill to be the Chair of it, and she
has done a great job. Senator Collins was Ranking Member on it
for a while, followed by Senator Brown, and now Senator Portman,
but you have remained right there at the helm with great effect for
the Committee and for the country. So I thank you for that, and
I look forward to your testimony and then Senator Webbs.

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TESTIMONY OF HON. CLAIRE MCCASKILL,1 A U.S. SENATOR
FROM THE STATE OF MISSOURI

Senator MCCASKILL. Thank you very much, Mr. Chairman. I


want to thank both you and the Ranking Member for all the work
you have done to improve contracting practices. You have been at
this for much longer than either Senator Webb or I have been in
the Senate, and I want to acknowledge your work; particularly Senator Collins deserves a great deal of recognition for all of her work
in terms of acquisition personnel.
It is so easy for us just to gloss over as we try to make the Federal Government smaller. It is so easy for us just to say, well, everything needs to be smaller. Well, no, it does not. There are a few
areas that cannot be smaller. Senator Coburn and I talked this
morning about the importance of fully funding the Government Accountability Office (GAO), our eyes and ears in terms of waste and
fraud throughout government, and clearly the acquisition personnel, the atrophying of that workforce has been a major contributor to the problems that we are seeing.
More than 4 years ago, Senator Webb and I began to advocate
for the creation of the Wartime Contracting Commission. At the
time I was inspired by Missouris own Harry Truman, who, as a
Senator, headed a committee that investigated and uncovered millions of dollars of war profiteering, fraud, and wasteful spending in
World War II. Senator Webb and I agreed that what we needed
was a new investigatory body to honor the Truman Committee to
protect our tax dollars and bring better accountability to the way
we do business while at war.
We use the cliche saying, They would spin in their grave, or
They would turn over in their grave. Harry Truman has been
spinning for some time now, and he would be astounded at what
this Commission found. It is shocking that the Commission has, in
fact, validated in many ways our worst concerns about the way
contracting was ongoing in contingency. It is disgusting to think
that nearly a third of the billions and billions we spent on contracting was wasted or used for fraud. Frankly, I really believe that
estimate is very conservative. And it does not even begin to include
the money wasted on projects that cannot be sustained, very similar to the Kabul power plant that you referenced in your opening
statement, Mr. Chairman.
I would like to take the opportunity to add just one more anecdote that confirms how serious the problem is.
Shortly after I came to the Senate, I took a trip to Kuwait and
Iraq on contracting oversight. I asked not to see what most Senators saw when they went to theater, but I just wanted to focus
on the way that we were overseeing contracts. I particularly wanted to hone in on the logistical support contract (LOGCAP), that had
been the subject already of a lot of negative headlines about the
way we had done business. It was a massive cost-plus contract,
non-competitive, that was supposed to provide all of the logistical
support for our men and women that were serving us in Iraq.
I sat in a small room in a building on the outskirts of Baghdad.
While many people in the room had lots of rank and were military,
1 The

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one woman, who was a civilian, clearly, was the knowledgeable one
about the LOGCAP contract. It was an awkward set of questions
and answers because clearly I was asking very tough questions. I
could not for the life of me understand how this thing had gotten
so out of control
The moment I will never forget as long as I live is when I began
to feelwhen you are pounding a witness on the stand as a prosecutor, sometimes you need to let up. Sometimes I did not. But, I
knew I needed to give this woman a break because all these men
and women were sitting in the room, and she was really being
called on the carpet for the way that this contract had been overseen. So she had a bar graph and the requisite PowerPoint that is
required in every military briefing. There was a bar graph that
showed the expenditures on the LOGCAP contract, and it had
started out at a number I cannot recall now, but in the billions,
and the next year it had dropped $2 or $3 billion, and then it had
kind of leveled out. So I am trying to throw her a bone.
And I say, You have left out of your presentation how you did
get the costs down the second year. As God is my witness, she
looked at me across the table, and she said, I have no idea. It was
a fluke. At that moment I knew that this was something that had
gone terrible bad in terms of contracting oversight.
The Commissions report and recommendations go to the heart of
how we got into this mess, how we got to a place in Iraq where
we were spending billions without a clue as to where it was going.
I applaud the Commission for their thorough, comprehensive, and
bipartisan review and for the tremendous contribution that they
have made to our understanding of these problems.
We must know why we are contracting, who we contract with,
and what we are paying for a particular service or function. It is
not complicated. Believe it or not, those three simple tests were not
met in most instances of contracting in Iraq. It is shameful that,
despite the great work of the Commission and the community of
auditors and inspectors general who have reviewed these contracts,
that we do not knowand may never knowthese simple things
about the contracts that have been awarded in Iraq and Afghanistan.
The Commission has offered a strong road map to improve accountability. I am encouraged to find that the Commission has recommended that the government increase its suspension and debarment, require consent of foreign contractors to the jurisdiction of
the United States of America, and to improve contractor performance data, which are all issues on which we have held hearings
and introduced legislation.
I do believe the issue of sustainability is crucial at this point.
While we know that the strategy against counterinsurgency involves something beyond conventional warfare, I do not think that
we have quite figured out, as an important culture of leadership in
our military, as we lead forces in terms of counterinsurgency, that
contracting oversight has to be part of the equation, including sustainability. We cannot build things for countries that they cannot
afford to operate. We cannot build things for countries in a security
environment that they are just going to be blown up after we have

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used countless billions of dollars of Americas hard-earned taxpayer
money.
Because the Commissions recommendations will require fundamental changes to the way government operates, I am planning to
introduce comprehensive legislation this year. I am working closely
with Senator Webb on this legislation and look forward to working
with the Members of this Committee as well.
As one of the generals said to me when I was in Iraq: You know,
so much of what we are seeing on this trip in terms of mistakes
were also made in Bosnia. And, by the way, we did a Lessons
Learned after Bosnia, except there is one problem: We did not
learn them.
They forgot to learn the lesson. If the Commissions report becomes one more report sitting on someones bookshelf, then we
have failed as a Congress and we have failed our military and the
people of this great Nation.
This is our chance to tell the American people that the government can spend their money wisely, hold people accountable who
are entrusted with contracting in contingencies, and make sure
that the men and women in the military and civilian agencies get
what they need to do their job. We cannot waste billions through
fraud, abuse, and mismanagement. We cannot fail to plan and then
outsource gaps in war planning to be done on the cheap. We cannot repeat these mistakes again.
Thank you so much for the opportunity to testify today. I do
want to commend my colleague Senator Webb. This would not have
gotten through the Senate, frankly, without the cooperation of the
Chairman and the Ranking Member and the hard work of Senator
Webb. I think we have something really good here if we do not take
our eye off the ball. Thank you, Mr. Chairman.
Chairman LIEBERMAN. Thank you, Senator McCaskill, for that
excellent testimony. I was struck by your reference to President
Truman, wherever he may be today. I know you are keeping that
spirit alive. It struck me that if we could go and interview him
about this Commission report and then release the transcript, we
would have to delete several expletives.
Senator MCCASKILL. In fact, I am really need to say for Harry
Truman, This makes me goddamned mad. [Laughter.]
Chairman LIEBERMAN. I knew you would not let me down. Senator Webb, thanks for being here.
TESTIMONY OF HON. JIM WEBB,1 A U.S. SENATOR FROM THE
STATE OF VIRGINIA

Senator WEBB. Thank you, Mr. Chairman and Senator Collins.


And special thanks to Senator Collins for her continuous involvement with this Commission as it went through the hearings process, and other Members of the Committee.
The purpose of this hearing is to allow the Commission members
to testify before you and to allow you to have an interchange with
them, so I would like to first say I have a longer written statement,
which I would ask be entered into the record, and I would just like
to summarize some of my comments from that at this time.
1 The

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Chairman LIEBERMAN. Without objection.
Senator WEBB. I would like to express my thanks to the Commission members, particularly the Co-Chairs Michael Thibault and
Former Congressman Chris Shays. A number of their fellow Commissioners and professional staff are here today. They did an exemplary job.
We talk in the Senate and in the Congress about presidential
commissions, and sometimes with a great deal of skepticism, but
I think this Commission demonstrates the way that these commissions should work. It was bipartisan, it was independent, it was
high energy. It was composed of highly qualified people who were
brought in for a specific period of time, and it is going to be
sunsetted in a very short period of time, having brought these observations and recommendations before the Senate.
When I came to the Senate in 2007, one of the eye-openers for
me as a member of the Senate Foreign Relations Committee was
a hearing in which the Department of State was testifying about
$32 billion in funding for programs for Iraq reconstruction projects.
I asked the government witness to provide the committee a list of
the contracts that had been let, the amount of the contracts, a description of what the contracts were supposed to do, and what the
results were. They could not provide us that list. We went back and
forth for months, and they were not able to provide us that kind
of information.
As someone who spent 5 years in the Pentagonone as a Marine
and four as a defense executive when I was on the Defense Resources Board for 4 yearsit was very clear to me that something
was fundamentally wrong with the way that contracts for infrastructure reconstruction, wartime support, and security programs
were being put into place in Iraq and Afghanistan after September
11, 2001.
Most of the companies who undertook these contracts were good
companies, and I think this Commission was very careful to mention that in its report. And they were doing a great deal of good
work. But there were also a series of major structural, procedural,
and leadership deficiencies in terms of the way that the wartime
contracting processes were supposed to be undertaken. You could
look at the dynamics of what was going onparticularly in Iraq at
that timeand know it was not out of the question to say that
even then billions of dollars were being exposed to waste, fraud,
and abuse for a wide variety of reasons.
After many discussions with Senator McCaskill, who has great
technical experience that she brought with her to the Senate, and
who had expressed similar concerns, as you just heard, we introduced legislation that led to the establishment of this Commission.
We had to give on some areas that we believed in strongly, such
as retroactive accountability for some of the abuses that had taken
place. We did not get that provision. We were not able to empower
the Commission with subpoena authority. But following close consultation with members of both parties, we were successful in having this legislation enacted that put the Commission into place,
and we achieved a consensus that the Commission would be independent, bipartisan, energetic, and that it would come to us with

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8
the types of recommendations that might prevent the recurrence of
these systemic problems and abuses in the future.
I commend the people on this Commission for the intensive effort
that they have put into satisfying this statutory mandate. They
went to extraordinary lengths here in the United States, as well as
in Iraq and Afghanistan25 public hearings with full transparency. Todays final report was preceded by two interim reports
and five special reports, and I wanted to come here and express my
appreciation personally for all the work that they have put into
this effort.
Thank you very much, Mr. Chairman.
Chairman LIEBERMAN. Thank you very much, Senator Webb, for
taking the time to be here and for your excellent remarks. We
thank both of you for being here.
I think we will move on right now to the members of the Commission, so I would call the members of the Commission to the witness table at this time.
I gather that, unfortunately, Michael Thibault, Co-Chair of the
Commission, cannot be here. He is, as you all know, former Deputy
Director of the Defense Contract Audit Agency and worked very
hard on the report. I am delighted that Mr. Thibaults Co-Chair is
here today, my dear friend and former colleague from Connecticut
in the House of Representatives, Chris Shays, who served during
his time as a senior member of the House Oversight and Government Reform, Financial Services, and Homeland Security Committees, and had a particular interest in this kind of matter, which is
to say protecting taxpayer dollars.
We also have with us Clark Ervin, Robert Henke, Katherine
Schinasi, Charles Tiefer, and Dov Zakheim, who is no stranger to
us because of his time as Comptroller in the Department of Defense.
Ms. Schinasi, I gather you have been voted the spokesperson.
Ms. SCHINASI. Yes, that is correct.
Chairman LIEBERMAN. We thank you, and thank you all for the
extraordinary work you have done here, and I join my colleagues,
the creators of the Commission, Senators McCaskill and Webb, in
thanking you for your hard work and really an excellent report
that gives us a road map forward. It is all yours.
TESTIMONY OF HON. CHRISTOPHER SHAYS,1 CO-CHAIR, ACCOMPANIED BY HON. CLARK KENT ERVIN, HON. ROBERT J.
HENKE, KATHERINE SCHINASI, CHARLES TIEFER, AND HON.
DOV S. ZAKHEIM, COMMISSIONERS, COMMISSION ON WARTIME CONTRACTING IN IRAQ AND AFGHANISTAN

Ms. SCHINASI. Thank you, Chairman Lieberman and Members of


the Committee, for inviting us today, to give us an opportunity to
talk about the work that we have done. As you mentioned, I am
Katherine Schinasi, a member of the Commission, and I am presenting this statement on behalf of the Commissions Co-Chairs,
Christopher Shays, and my fellow Commissioners Clark Kent
Ervin, Robert Henke, Charles Tiefer, and Dov Zakheim, who are
1 The joint prepared statement of the Commission on Wartime Contracting in Iraq and Afghanistan appears in the Appendix on page 63.

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here today; and Grant Green, who unfortunately could not be with
us.
If I may, I would like to summarize my statement and submit
the full statement for the record, as well as a copy of our final
Commission report.1
Chairman LIEBERMAN. Without objection, thank you.
Ms. SCHINASI. Thank you.
It is fitting that this Committee should be the first to hold a
hearing on our final report as Senate rules give you the unique authority to inquire into the efficiency, economy, and effectiveness of
all agencies and departments of the government, including the organization of Congress and the Executive Branch. The solutions to
contingency contracting problems that we have reported require
such a coordinated whole-of-government approach.
We also believe the need for change is urgent, and let me give
you several reasons why.
First, reforms can still save money in Iraq and Afghanistan,
avoid unintended consequences, and improve the outcomes there
because ironically, even as the U.S. draws down its troops in Iraq,
the State Department is poised to hire thousands of new contractors there.
Second, new contingencies, in whatever form they take, will
occur. One has only to remember how quickly U.S. involvement in
Libya arose to recognize that the odds are in favor of some type of
future operations. And the agencies have acknowledged that they
cannot mount and sustain large operations without contract support.
Third, although the U.S. Government has officially considered
contractors to be part of the total force available for contingency
operations for at least the last 20 years, the Federal Government
went into Afghanistan and Iraq unprepared to manage and oversee
the thousands of contracts and contractors that they relied upon
there. Even though some improvements have been made by the
agencies involved, a decade later the government remains unable
to answer that it is getting value for the contract dollars spent and
unable to provide fully effective interagency planning, coordination,
management, and oversight of contingency contracting.
The wasted dollars are significant. As you pointed out in your
opening statement, the Commission estimates that at least $31 billion and possibly as much as $60 billion of the $206 billion to be
spent on contracts and grants in Iraq and Afghanistan have been
wasted, and many billions more will likely turn into waste if the
host governments cannot or will not sustain U.S.-funded programs
and projects. We believe that failure to enact powerful reforms now
will simply ensure that new cycles of waste and fraud will accompany the response to the next contingency. And we also believe
that these reforms could have wider benefits.
In our work on Iraq and Afghanistan, we found problems similar
to those in peacetime contracting environments and in other contingencies. This Committee, in particular, will recognize many of
the problems we discovered are similar to those that were con1 The Final Report of the Commission on Wartime Contracting appears in the Appendix on
page 183.

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tained in your 2006 report on Hurricane Katrina, and some of
those are poor planning, limited or no competition, weak management of performance, and insufficient recovery of overbillings and
unsupported costs.
The wartime environment brings additional complications which
we address in our recommendations, for example, limited legal jurisdiction over foreign contractors and limited deployability of Federal-civilian oversight personnel into theater.
If I had to give you just one bottom line, it would be that the
wasteful contract outcomes in Iraq and Afghanistan demonstrate
that our government has not recognized that its dependence on private contractors, especially for services, is important enough to effectively plan for and execute those acquisitions.
The Commission has concluded that the problems, however, are
multi-faceted and need to be attached on many levels. The first is
holding contractors accountable. Federal statutes and regulations
provide ways to protect the government against bad contractors
and impose accountability on them, including suspension and debarment from obtaining future contracts, as well as civil and criminal penalties for misconduct. Unfortunately, we found that these
mechanisms are often not vigorously applied and enforced. And incentives to constrain waste are often not in place.
The Commissions research has shown, for example, that inadequate business systems create extra work and deny the government of insight and knowledge on costs that we are being charged
for the work done. Fraud may go unprosecuted, recommendations
for suspension and debarment go unimplemented, and past performance reviews often go unrecorded.
One important check on contractor overcharges is the Defense
Contract Audit Agency (DCAA). Currently, DCAA has a backlog of
nearly $600 billion, which by some accounts could reach $1 trillion
by 2015 if not addressed. The DCAA has reported a 5:1 return on
the investmentthat is, for every $1 invested in DCAA, the government recovers $5and we would say that is a pretty important
investment to keep in mind when we are thinking about how to fix
these problems.
The government has also been remiss in promoting competition.
Although exigent circumstances may require sole-source or limited
competition awards in early phases of a conflict, a decade into an
operation the multi-billion-dollar tasks orders that are being written with no break-out or recompetition of the base contract just defies belief.
Our report contains recommendations to bolster competition, improve recording and use of past performance data, expand U.S. civil
jurisdiction as part of contract awards, require official approval of
significant subcontracting overseas.
The second level we would attack is holding the government
itself more accountable both for the decision to use a contractor in
the first place and for the subsequent results.
Even when the government has sufficient policies in place, effective practices, which range from planning and requirements definition to providing adequate oversight of performance and coordinating interagency activities, are lacking. The Departments of Defense and State, and the United States Agency for International

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Development (USAID), the three principal agencies involved in
Iraq and Afghanistan operations, have all made improvements. But
much work remains to be done.
We have recommended developing, for example, deployable acquisition cadres, elevating the position of agency senior acquisition
officers, and creating a new contingency contracting directorate at
the Pentagons Joint Staff, where the broad range of contracting activities is currently treated as a subset of logistics. Contracting has
gotten to be much more than just a subset of logistics.
Considering this Committees broad and interdepartmental mandate, I would call special attention to two recommendations embodying a whole-of-government approach that will improve efficiency and effectiveness in contracting.
The first is to establish a dual-hatted position for an official to
serve both in the Office of Management and Budget (OMB) and
participate in National Security Council (NSC) deliberations. Such
a position would promote better visibility, coordination, budget
guidance, and strategic direction for contingency contracting. Currently, national security decisions are not informed by resource implications generally, and that is particularly troubling and distortive in this context because contractors are considered to be a free
resource.
The second recommendation of an interagency nature is to create
a permanent IG with a small but deployable and expandable staff
that can provide interdepartmental oversight from the outset of a
contingency. The Special IGs have done some important work, but
they have been hampered by their limited jurisdictions and their
costly startups.
Finally, our Commission closes its doors in just 9 days. Our organization disappears, but the problems it has chronicled will not. Action, and in some cases appropriations, will be required to implement these reforms. Sustained attention will be essential to ensure
that compliance extends to institutionalizing reforms and changing
organizational cultures. That is really the gist of itinstitutionalizing these reforms and changing the cultures. That is why our
final recommendation includes periodic reporting to the Congress
on the pace and the results of reform initiatives.
In closing, I believe that the Commissions work has demonstrated that contracting reform is an essential, not a luxury
good.
Whatever form it takes, there will be a next contingency, and
contractors will take part. Planning now and putting the necessary
structures in place will greatly increase the likelihood of having
better options and making better choices.
That concludes our formal statement. My colleagues and I would
be happy to take your questions.
Chairman LIEBERMAN. Thanks very much for that excellent beginning. We will do 7-minute rounds of questioning.
I wanted to ask you whether the contracting process in your view
improved over the years of our involvement in Afghanistan and
Iraq. In other words, based on some of the things that are implicit
in your report, but certainly in other IG reports and our own observations, you could say, I suppose, or argue that some of the early
waste resulted from basically the lack of planning and the rush to

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do it, and also the rapidly shifting governance structure during reconstruction. But I wondered, in your investigation did you find
any dividing lines between different stages of the wars and reconstruction? Obviously, I am looking to see whether there was improvementwe talked about lessons learned from Bosnia. Did we
learn any lessons in Afghanistan that we applied in Iraq, or in Iraq
that we applied as Afghanistan went on longer?
I do not have a particular choice of Commission members, so I
will leave it to you all to decide who feels best able to answer each
questions.
Mr. SHAYS. Let me just jump in for this first one to thank you,
Mr. Chairman and the Members, for allowing the full Commission
to attend because each of us is more than qualified to answer any
of your questions. I think the simple answer is yes, there was a noticeable improvement. But contracting became the default option,
and we just did too much too quickly. And when you have an emergency supplemental, it is not part of the regular budget. It is almost like a free thing to draw money on. So we just drew too fast,
and then we did not change. After the first year, you have a time
where you say you cannot keep doing it the way you were doing
it, and we kept doing it the way we were doing it.
Chairman LIEBERMAN. And if you had to give a reason whywhy
did we keep doing it the way we were doing it, even though people
right there must have known it was not really working as well?
Mr. SHAYS. It is an easy option to just keep relying on contractors, and when you have a contractor who is performing, even if
they are very expensive, you just want to keep going the way you
are going.
Chairman LIEBERMAN. Because they are doing the job?
Mr. SHAYS. They are doing their job, but at an extraordinarily
cost.
Chairman LIEBERMAN. Very high.
Mr. SHAYS. Just quickly, having 15 people maintain electricity on
a base when only three are being used and they end up having so
much free time that they decide to build themselves a clubhouse,
they are working 12-hour days and only three are working, and we
did that for years.
Chairman LIEBERMAN. And nobody blew the whistle. I mean, it
was pretty obvious that was happening.
Let me pick up on the phrase you used because you warn about
the use of contractors as the default option in Iraq and Afghanistan
because, I presume, the government felt it lacked the capability in
people they had working for them to perform many of these jobs.
Use of private security contractors and use of contractors to oversee other contractors are two examples of what you referred to as
the default option, and I agree. What are some of the other responsibility categories or functional categories that, in your opinion, have too often been placed in the hands of contractors in the
work that you did? Ms. Schinasi.
Ms. SCHINASI. I would look next at training, frankly.
Chairman LIEBERMAN. Training.
Ms. SCHINASI. Yes, because that is a function we almost totally
outsourced to private companies.
Chairman LIEBERMAN. Mr. Zakheim.

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Mr. ZAKHEIM. I would add, Senator, if you look at USAID in particular, that is an agency that years ago did its own work, frankly.
It has become a contract management agency, and Rajiv Shah, the
Director, admits it and is trying to change it. But over the last decade, they have essentially farmed out everything, including sometimes managing the contracts.
Chairman LIEBERMAN. Yes, that is right. Hire contractors and
then hire more contractors to watch the other contractors.
We talked about this this morning on a bill we did a markup of
on the Department of Homeland Security, and, of course, this is not
only in the war zones that this happens, although the financial implications in the war zones was so high.
Now, I am going to ask you, because you had some hands-on experience in the Department of Defense, what can we do to stop
this? I presume what you are saying is you think we are overusing
private contractors to fulfill government functions.
Mr. ZAKHEIM. I think we are all saying that, yes, sir.
Chairman LIEBERMAN. So how do we draw the line? When do we
decide that something really should be done by a full-time Federal
employee?
Mr. ZAKHEIM. Well, the standard answer is if it is inherently
governmental, that is to say, it is something that the government
should be doing. What we write in our reportand we all felt very
strongly about thisis that is not really the right measure in a
war zone, and the reason is it may be that there are some tasks
like, say, involving private security that in theory a contractor
could do, but in practice maybe it involves security issues or contractors that might fire too quickly if they feel they are being attacked, or are susceptible to bribery or corruption. We have a photograph in our report of an invoice that an Afghan insurgent group
actually handed to a subcontractor, essentially saying if you want
protection, here is the number to call.
So there are going to be circumstances where the theory of inherently governmental does not fit, and so we felt that the measure
should be risk. What are we risking here? And there will be cases
where it clearly is not in the interest of the government to have
a private entity taking on risks.
Chairman LIEBERMAN. So what are the risks? In other words,
how do you define risk in this case?
Mr. ZAKHEIM. Well, you could define risk, for example, if it is a
very serious combat zone and you run the risk that maybe the contractor will be attacked or, alternatively, will attack first because
they think they are being attacked.
Chairman LIEBERMAN. Right. So a final question because my
time is running out. You have been inside. This seems like maybe
a question that a Senator should not be asking, but I am interested
in your answer. Why are we using so many private contractors to
fulfill governmental responsibilities? Not only here in the area that
you covered but we recently heard testimony about the number of
people working for the Department of Homeland Security under
contract. It is just about as many as the regular employees of the
Department. It is really stunning.
Mr. ZAKHEIM. Well, one of the reasons, frankly, isand we allude to that in some of our reportstraining. Our civilians just are

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not trained. You can get a degree and then go into government and
never have to take another course again. Well, if you want to keep
up with things, you hire somebody else to do it for you because you
cannot do it yourself. So that is one reason.
Another reason is that we cut backit was not so much that we
had too many contractors in some circumstances. We had nobody
to manage and oversee them, and that was because in the 1990s
we cut back very seriously on just those kinds of people.
So it varies with the circumstances. In some cases we had just
people doing jobs that the government should have been doing. In
other cases it was we did not have the government people to oversee those doing the jobs.
Mr. SHAYS. Senator, could I just make sure that we are clear?
Chairman LIEBERMAN. Yes, Congressman.
Mr. SHAYS. Literally half of the personnel in theater are contractors, and there is a tremendous imbalance with the number of civil
servants that are there. And we did not really address that the way
we might have liked to have. But you have defense contractors and
civil servants down here, and we seemed to have to pay the civil
servants a lot of money to want to go into theater. And I just want
to make sure that we are also clear that when we talk about inherently governmental, if it clearly is inherently governmental, the
government should do it. But when we say it is not inherently governmental, the government still maybe should be doing it.
Chairman LIEBERMAN. Got you. My time is up. Obviously, we
will come backI am sure my colleagues willand ask you if the
contractors are cheaper, which is one of the arguments that is
made for contracting as well.
As is the custom of our Committee, Senators are to be called in
order of appearance: Senators McCaskill, Tester, Coburn, Levin,
and Carper. Senator McCaskill.
Senator MCCASKILL. Well, I do not know where to start. There
are so many things I would like to talk about with all of you.
First of all, let me once again say thank you. I am not sure that
America understands the kind of expertise that I have sitting in
front of me, and all of you brought to this work unique backgrounds that made the combination of your efforts so powerful. And
I will tell you, I will not rest as long as I am here until we get this
work done. So I do not want you to think that the time you have
spent and the effort you have madeand I will tell you, I am proud
that you are shutting down in 9 days, because one of the arguments against the legislation wasin fact, I think Dr. Coburn has
made this argument a few timesthat we start these kinds of
things and they never end. So I think you have done great work
I get that. [Laughter.]
I get that, Dr. Coburn. We have not stopped as many of them as
we should, but I am very proud of the work the Commission has
done.
I want to talk about something that I mentioned and you mentioned in your report, but I think it is something we need to flesh
out for this Committee, and that is, contractors being subject to the
jurisdiction of the United States of America. A heart-breaking incident in Iraq that, I am sure you all are aware of where the negligence of one of our contractors, killed one of our soldiers, and in

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trying to find justice for that family, the contractor avoided the jurisdiction of the United States. And the most insulting thing about
it was that company then got another contract with our government. After they had used the fact that they were not subject to
the jurisdiction of our country as a way to avoid justice for this
mans family, we then decided we should sign up again with them.
By the way, they are now accused of also doing business with
Iran, so there are also some sanctions that need to be put in place
as it relates to that.
But one of you please talk about the importance of anybody who
wants to do business with the United States, and what are the arguments on the other side, and why has the military been so reluctant to embrace this requirement.
Mr. ERVIN. May I start that, Senator?
Mr. SHAYS. Go for it.
Mr. ERVIN. As you know, one of the huge issues that we have
dealt with during the course of the Commission in particular is the
lack of visibility with regard to subcontractors, and this lack of
being subjected to the U.S. jurisdiction is particularly acute for
subcontractors. And it is our recommendation that as a condition
for being awarded the subcontract by the prime contractors, that
subcontractors in particular subject themselves by virtue of the
contract to U.S. jurisdiction.
You asked for the contrary argument, and, quite frankly, I cannot think of one. This is American taxpayer money, and, therefore,
the American taxpayer has a right to demand this level of accountability.
Mr. TIEFER. Senator, if I can expand on that answerand I do
want to mention, the bill that you mentioned, which has been nicknamed the Rocky Baragona bill
Senator MCCASKILL. Right.
Mr. TIEFER [continuing]. Shined a light into what is a complicated area to figure out how to deal with, so it was helpful to
us.
Let me mention two examples. One is Tamimi Global Company,
the other is First Kuwaiti Trading and Contracting, and what our
hearings found and our missions was complete irresponsibility, that
is, lack of responsibility by foreign contractors, and especially subcontractors, as Commissioner Ervin said.
Tamimi came before a hearing of ours. We asked them for
records, and they basically laughed in our face. They said: Go
away. We are not going to give you any records. We were not required to give them to DCAA. We are not required to give them to
you on a subject called tainted subcontracts.
First Kuwaiti, which owed the government $124 million, according to the State Department IG, is not paying. But it is continuing
to get contracts from them.
The argument that was put on the other side is that if you require foreign contractors to submit to U.S. jurisdiction, some will
not want to compete for U.S. contracts, and you will, therefore, lose
competition. I leave it to yourself to estimate if that is a likely
prospect.
Senator MCCASKILL. Well, at a minimum, should we be thinking
about legislation that says to the U.S. Government, if someone has

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done business with us and owes us money and they are a foreign
contractor, then that should equal suspension and debarment?
Mr. TIEFER. Commissioner Shays is something of a pioneer in
strengthening the suspension and debarment tool, and that would
be a good use of it, yes.
Senator MCCASKILL. Thank you so much, Congressman Shays,
for taking this assignment. A lot of people were vying for your talents at the moment you decided to step up and help us here, and
I am really so glad you did. Tell me why you thinkit has been
beyond frustrating to methat not only are these guys not doing
the work under a contract, they are then getting performance bonuses instead of suspension or debarment?
Mr. SHAYS. Well, the real expert is right here in the Commission.
The one area we backed off a little bit was automatic suspensions.
We do think that in the end there are other factors that need to
come in play. But it is very clear that contractors do not think they
pay a penalty, and one way they do not think they pay a penalty
is that they are not going to get replaced because the process takes
so long, so they are going to still be around for a year, and it is
one of the reasons that we recommend that there should be a special cadre of government peoplenow I am talking civil servants
who can come in and guard an embassy, can guard a facility, do
something that contractors were doing, get them out right away
and just bring in government people to replace them. I think that
would do wonders, and that is one of our recommendations.
Senator MCCASKILL. So it almost goes under the category we can
screw up because they are stuck with us and they cannot really do
anything because we are in a contingency and they cannot leave
this function bare and they have no back-up.
Mr. SHAYS. You got it.
Ms. SCHINASI. Exactly.
Senator MCCASKILL. And so if we could convince the military
we have redundancies of systems in almost everything in national
security, but we have no redundancy systems in contracting. And
I think you have hit the nail on the head, that this has not been
a priority for the military, and we would never think of not having
a redundancy in some of the core military functions that relate to
the mission, and contracting has become one of those.
Thank you very much, Mr. Chairman.
Chairman LIEBERMAN. Thank you, Senator McCaskill. Senator
Tester.
OPENING STATEMENT OF SENATOR TESTER

Senator TESTER. Thank you, Mr. Chairman, and I want to thank


Senator McCaskill and Senator Webb for testifying before. This is
a critical issue. I have not decided whether I need more blood pressure medicine or a bottle of brown liquor to take care of this problem.
Mr. SHAYS. Both.
Senator TESTER. Yes, you are probably right.
Mr. SHAYS. Not at the same time, though.
Senator TESTER. The issue of private contracting, I cannot help
to think, did not come out of the whole privatization of government
from a decade or so ago, and we can see where that has got us.

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It is unfortunate Senator Webb is not still here. Being a student
of history, I wanted to ask him about when wars started to be
fought for profit. I do not know that it has been an occurrence
throughout our history, but maybe it has. But I will say one thing.
It is long past the time where we need to start to bring accountability and change the way contractors do business for this country.
I can tell you this: In the private sector, if I have a contractor
that owes me money, he is not getting another contract. I mean,
that is just the way it is. And I cannot believeand I do not know
what happened to the system that would allow justification for
somebody to tell you that you are not getting any information and
that is the way it is, and that we are still doing business with that
person. It is incredible.
I believe it was you outcome, Ms. Schinasi, that talked about an
emergency supplemental being looked at as free money. I mean,
how does this happen? These are government/taxpayer dollars, borrowed or otherwise in this particular case. How do we get to a
point where people within the government, military or otherwise,
look at any dollars as free? Can you give me any insight into that?
Ms. SCHINASI. The lack of discipline in the supplemental allowed
a lot of what Senator McCaskill was just talking about to occur,
and that is, we do not need to have any discipline in our requirements process because we can always get more money.
The corollary to that is the contractors were also considered to
be a free resource, so we never had to factor into our planning
Senator TESTER. And were they considered a free resource because they were off budget or what?
Ms. SCHINASI. They were off budget, and the government itself
is constrained by what is called full-time equivalents (FTEs), so the
number of government employees is capped. So you can keep putting missions on. In many cases these were new missions that the
agencies were taking on. They did not have anybody to do it, so let
us just go hire a contractor. And, by the way, we do not have to
count that anywhere, either the money we spend or the people that
we hire.
Senator TESTER. I think it was Senator McCaskill who said onethird of the money that was spent was wasted. Is that for the
whole war effort?
Mr. SHAYS. The figure is between $30 and $60 billion. The argument we would make, many of us, is that it is closer to $60 billion.
But even if it was $30 billion, we are talking out of $206 billion.
Senator TESTER. So retroactive accountability, you did not have
the ability to look back. But yet I heard Ms. Schinasi or one of you
say that things got better, to the Chairmans question, as time
moved forward. Do you think if we looked back the waste was even
higher than what it is over the period that you looked at?
Mr. ZAKHEIM. I would not say that, Senator. I think there was
an improvement, there is no doubt, one of the reasons being when
I was in the Departmentand it was at the beginning of the Iraq
warwe let contracts that are called undefinitized. That is a
fancy word meaning you do not have the specifics. And, of course,
we improved on that with time.
But in other areas we did not, and the fundamental problem is
what my co-chairman just talked about. We did not have the people

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to go out there, partly because they did not want to go out there.
I can tell horror stories about that one.
And so you had a situation where it was contractors by default.
If you do not have your civil servants ready to go to the theater
and you cannot force them to go. Military people go. Foreign Service people go. Civil servantssome do, some do not.
I will give you an example of that. We were out in Afghanistan,
and we were talking to people from the Agriculture Department. It
turned out that the Agriculture Department could not fill its allotment of people to go to Afghanistan. And we are not talking about
thousands. We are talking about dozens. They still could not fill
the allotment. And those who went came from the Foreign Agricultural Service, most of whom had never seen a farm in their life.
So that is an example.
Senator TESTER. Great. OK.
Ms. Schinasi, in your testimony you talked about the fact that
the waste and fraudwaste, in particularmay even be higher if
the host governments cannotwere you able to do any projections
on that? Quite frankly, when I was in Afghanistan, they did not
look like they were rolling in dough. And so when that turns
around and the troops can pull out, I do not anticipate these
projects will go forward. Did you guys do any projections on how
much money that might be?
Ms. SCHINASI. We do not have comprehensive numbers on that.
I can tell you that the Special IG for Afghanistan Reconstruction
came before us and said the entire $11 billion that we are spending
on the Afghan National Police Program is at risk. That is just one
program and one number. But that is clearlywe issued a special
report on sustainability because we were so concerned not only that
projects had already been started that could not be sustained, but
that we were thinking about starting new projects that could not
be sustained.
Mr. SHAYS. Senator, could I make a point?
Senator TESTER. Yes, go ahead.
Mr. SHAYS. We started outand Robert Henke was making this
point to us, and it really got us focused on this. He said, Well, it
is clear we have got to oversee contractors better, and we are not
doing a proper job.
Senator TESTER. Right.
Mr. SHAYS. And then we began, Well, if we cannot oversee contractors better, then maybe we should not be trying to do too many
contracts.
Senator TESTER. Right.
Mr. SHAYS. And it even got to the point, as we have been working on this, that we think we are trying to just do too much. We
are just trying to do too much.
Senator TESTER. Right.
Mr. SHAYS. The gross domestic product of Afghanistan was hovering around $1 billion. We have about $24 billion in the economy
now. We have totally distorted the marketplace.
Senator TESTER. Yes.
Mr. SHAYS. And one little quick point. We were doing a wonderful agricultural program that is the culture and the people. And

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then we had to spend money by the end of the budget year, and
we came in with $300 million to try to redo this program.
Senator TESTER. What do we do about this? I mean, you guys
have some recommendations about holding contractors accountable,
about making sure government promotes competition. But when we
are putting people involved in agricultureand that is something
that I am involved inthat do not know jack about agriculture and
expect to teach people who need to learn about agriculture to support themselves, and they have no way, no chance of being able to
communicate any kind of information because they do not have it
in their head to start out with. Who makes the calls on that? Is
this the head of the State Department? Is this the head of our military? Not to quote Harry Truman, but where does the buck stop
on all this stuff? I mean, we can de-fund it all. I am not sure that
is the right method to use. But maybe it is.
Mr. SHAYS. Well, let me just quickly say we recommend some key
positions. To have the National Security Council decide to do
things and not consider cost, that is why we want a dual-hatted position, someone at OMB there. We recommendand, to Senator
Levin, this is obviously very controversial, but we think there
needs to be a J10. We think we have so many contractors part of
the military effort, and there is really no coordination at the Joint
Chiefs of Staff to deal with that issue.
Senator TESTER. I mean, isnt it incumbent upon the Joint Chiefs
to be able to consider costs when they are doing their job? Now, I
understand it is the protection of the country, but the head of the
Department of Agriculture could say, It is my job to make sure we
have food security so I am going to spend every dollar I have got.
Ms. SCHINASI. We would say yes.
Senator TESTER. Yes, I understand that, but isnt it incumbent
on the people who are there not to have a cop sitting in a room
making sure that they are following the rules?
Mr. ZAKHEIM. Well, we recommend that somebody at the Assistant Secretary level in all of the key agencies, including USAID,
which would be the place which, together with the Agriculture Department, would worry about the kinds of programs you were talking about, somebody specifically in charge of contingency contracting issues. If you do not get the leadership at the top
Senator TESTER. That is exactly right.
Mr. ZAKHEIM [continuing]. That is not going to follow.
Senator TESTER. I just want to thank you guys for all your work.
I very much appreciate it. And I am with Senator McCaskill, and
probably everybody who sits at this table. We have a big problem.
We have to deal with it. We are talking about cutting programs
that people actually need to pay for this kind of garbage.
Thank you very much.
Chairman LIEBERMAN. Hear, hear. Thanks, Senator Tester. Senator Coburn.
OPENING STATEMENT OF SENATOR COBURN

Senator COBURN. Gosh, for the first time in my life, I am going


to be calm compared to the previous questioner. [Laughter.]
Chairman LIEBERMAN. Oh, no, you are just beginning, Senator
Coburn.

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Senator COBURN. First of all, I would like to offer my sincere
thanks for your efforts. I have been on commissions, and oftentimes
the amount of effort that goes into that is not fully appreciated and
the amount of time that is spent. So I offer you my thanks for it.
I have a couple of questions. Are we going to have a second
round, Mr. Chairman?
Chairman LIEBERMAN. If you would like.
Senator COBURN. I want to talk about a couple of things. I am
a big fan of IGs. I think generally they do a super job. In Afghanistan it has been a disaster. And I am worried about one of your
recommendations, and that is to have this new IG, simply because
in lots of other areas where we have the Special IG for Iraq, we
actual got some good data out of there. A lot of what you know we
learned through Stuart Bowen and a lot of his efforts. But I am
worried about creating another one when we are not managing in
Afghanistan the ones we have. And so it is fraught with some difficulty because we are not holding somebody to accountability and
we have not. Our last IG, in my opinion, was incompetent there
not the one that took General Arnold Fields place, but General
Fields actions did not measure up at all at any level of a standard
of that. So I worry about that.
I would like for you to really comment on why you made that recommendation and how that contrasts with holding the institutions
that we have, Special IG for Afghanistan, Special IG for Iraq, and
what was done. Then I am going to share with you my observations, having been three times to Afghanistan and what I saw
change, especially in the last 2 years, especially since Rajiv Shah
came on.
Ms. SCHINASI. Right.
Senator COBURN. Because there is a big difference with effective
management. So would you comment on that recommendation?
Mr. ERVIN. May I start with that, Senator? I was the Inspector
General at the State Department at the beginning of the Bush Administration, as you may know, and I was the first Inspector General at the Department of Homeland Security, so I was among the
Commissioners who most focused on that recommendation. And I
am speaking for myself, I think I speak for the Commission when
I say I agree with what you say about the Special Inspector General for Iraq Reconstruction (SIGIR). I think Stuart Bowen, with
whom I served in the Bush Administration and beforehand in
Texas State government, has done an exemplary job and has set
the bar very high for the kind of accountability that we should all
demand with regard to these war theaters.
I also agree with you that, to put it charitably, the Special Inspector General for Afghanistan Reconstruction (SIGAR), by way of
contrast, has been slow off the mark. There is no question about
it. But it seems to me the contrast between the two proves our
point, namely, knowing that we are going to be involved, whether
we like it or not or whether we admit it or not, in contingencies
going forward, that we have at the inception of contingencies someone who is adequately trained, adequately staffed, and we are talking about, as you know, an expandable office that would not have
a huge staff permanently but, rather, would be able to scale up and
scale down as circumstances require.

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Of course, under our recommendation, both SIGIR and SIGAR
would go away, so it is not as if there would be a third Inspector
General. It is just there would be a standing one that would work
in concert with the statutory Inspectors General and with GAO.
And I guess the final thing I would say about it is this recommendation is not intended to in any way denigrate from the
work of the statutory Inspectors General. But as you know, they
are each limited in that they are limited to the jurisdiction of the
agency, and the Special IGs, while they have agency-wide jurisdiction, are limited temporally and with regard to a subject matter.
Senator COBURN. All right. Thank you. One of my observations
when you go into theater as a Member of Congress is you get the
brief, and all the different groups are there. My first trip there,
about 80 percent of them could not answer the questions, the people sitting at the tableI am talking about people who were responsible for the areas. And that changed a little bit the second
time. But the third time I went back, that guy actually knew what
he was talking about and knew what they were doing, and they
were deployed. And they happened to be Oklahoma National Guard
guys because they were farmers from Oklahoma that are part of
the Guard that actually are farmers. There just was not enough of
them, and they were not there long enoughcontinuity in what we
do is important as well.
But I specifically want to compliment the head of the USAID,
and the point I would make is something that we ought to be demanding because the problems you are describing did not just happen over there. It happens every day here. We know it. You talk
about contracting problems. My friend the Chairman here knows
we have big contracting problems on military projects that have
nothing to do with our efforts in Afghanistan or Iraq. But the difference is the Administrator of USAID demands metrics now, and
it is known going in: If you cannot give me metrics, we are not
going to continue the program.
So one thing that I did not see in your recommendation was in
the contracting to actually have a metric requirement of performance on everything we contract for, then that would have presumed
that you know what you are buying. So if you cannot establish and
have a metric for it, you do not know what you are buying, you
ought not be buying it.
And so I would like your comments on that because I see a big
difference. I have been a big critic of USAID for 6 years, and I
want to tell you, I am in love with the Director because what I see
him doing is effective management that makes U.S. taxpayer dollars go further and much more effective.
Mr. SHAYS. Senator, when we met with him privately, it was one
of the most impressive meetings. When he came and testified before us, after OMB decides what he can say and what some of his
staff decide what he can say publicly, it is not as helpful. And one
of the things that would be wonderful is to have the candidness
that he presented to us in meetings that you may have with him,
if we in government just were a little more candid. It is not the
fault of anyone in government now that contracting is bad. It goes
way back. And people are trying to improve it, but we just need

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to be honest with each other and admit that we have a long ways
to go.
Mr. ZAKHEIM. Let me deal with the metrics issue, Senator. What
Rajiv Shah is getting right is not metrics. I mean, DOD will throw
zillions of metrics at you. I used to. The issue is the right metrics.
And Shah understands and his people understand that there are
metrics and metrics.
So it is not a matter of saying we need metrics. Everybody who
is on a contract will throw metrics at you. it is understanding what
are the right ones. And what it is doing is fundamentally changing
the culture of the place.
Senator COBURN. I can give you a lot of contracts in Afghanistan
that had no metrics on them.
Mr. ZAKHEIM. That is even worse, of course. But he is changing
the culture so that they think the right way about these things.
And one of the things that one of our colleagues, Grant Green, who
could not manage to get here today, has constantly emphasized is
we have to change the culture, whether it is in DOD, the commanders in the field, USAID, State Department, what have you,
about the way they think about contracting.
Senator COBURN. All right. I am out of time. Thank you.
Chairman LIEBERMAN. Thanks, Senator Coburn. Senator Levin.
OPENING STATEMENT OF SENATOR LEVIN

Senator LEVIN. Thank you very much, Mr. Chairman. Let me


thank, first of all, Senators McCaskill and Webb for their efforts
to bring this Commission into existence. Their leadership on this
is critically important. Senator McCaskill came to this body determined that she was going to focus on oversight. She has done exactly that. It has been invaluable to us. Your work is very important. I commend you on it, your willingness to serve.
One of the things you point out is the overreliance on private security contractors in Iraq and Afghanistan. That is not a new point.
That is a point which has been very dramatically present for some
time.
Last September, the Senate Armed Services Committee released
a report based on a year-long investigation of the role and the oversight of private security contractors in Afghanistan, and we concluded that the proliferation of private security personnel in Afghanistan is inconsistent with our strategy; that Afghan warlords
and strongmen acting as force providers to private security contractors have acted against U.S. interests and against Afghan interests; that widespread failures to adequately vet, train, and supervise armed security personnel pose grave risks to U.S. and coalition
troops, as well as to Afghan civilians.
Now, I assume that the Commission is familiar with that report.
First of all, I am wondering whether you agree with the conclusion
of that report; but, second, before I ask you questions about what
legislation you are recommending following your report, I am interested as to your reaction to what legislation we have recently
adopted, what recommendations we have recently made to see
where that falls short; and then I am going to ask you about what
additional legislation, if any.

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But, first of all, are you familiar with those recommendations? If
so, do you agree with those recommendations that I have just read?
Mr. TIEFER. Senator, I am familiar with that report. The Commission is familiar with the report. I want to say our own report,
in fact, passed the ball along, and further investigations have been
going more and more deeply into it. We noted that our private security in Afghanistan appears to be a major source of payoffs to the
Taliban. Our report has the first official statement that it is the
second largest source of money for the Taliban.
Senator LEVIN. After drugs.
Mr. TIEFER. After drugs, that is right.
Senator LEVIN. That is similar to our finding. But here is what
followed our report. The Department of Defense established a number of task forces, directed that remedial action be taken, and so
the question is: Have those task forces been effective? Are they operative? General David Petraeus himself told me about the importance of this issue to him. Now, he is kind of the most recent father
of our counterinsurgency strategy, and I just am wondering: Are
you familiar with those task forces? Are they effective? Are they operative?
Mr. TIEFER. Well, one of them, according to public sources, came
up with the figure of $360 million being paid to the Taliban, so
they are at least grappling with the issue.
Senator LEVIN. Did you have a chance to interview those folks?
Mr. TIEFER. I interviewed a group of analysts who sort of worked
for them or with them, and there is one useful thing that is being
done, although it is not considered to be enough to get control of
the problem. There is a type of vetting using intelligence information which is at least going to keep the bad guys from being direct
contractors to us. But that is obviously only a portion of the problem.
Senator LEVIN. All right. Mr. Zakheim.
Mr. ZAKHEIM. We were briefed in Afghanistan about this. Some
of it we cannot discuss here. I was with Co-Chairman Shays out
there, and I think they are clearly getting their arms around the
problem. Getting your arms around the problem is not necessarily
solving it, and a lot of this is still clearly going on, and it is going
to take some work because, again, a lot of it has to do with what
you heard earlier: Visibility into subcontracts.
Senator LEVIN. I agree with thatvery much, as a matter of fact.
In the fiscal year 2008 defense authorization bill act, we had a
section called Section 862, and what this required was governmentwide regulations to be issued on the selection, training, equipping,
and conduct of contractor personnel performing private security
functions in Iraq and Afghanistan. So that was in the fiscal year
2008 authorization bill, and I am wondering whether you can tell
us whether the Federal agencies have complied with the requirements of Section 862.
Mr. SHAYS. I cannot. Mr. Henke.
Mr. HENKE. They have issued the guidance and the instructions,
and it has been out for public comment. The issue, though, as you
are well aware, is that there is a big difference between what the
policy says and what is being executed nine levels below in the
field.

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Also, notably, I believe that Section 862 makes it up to the chief
of mission in the State Department in the country whether they
are following those regulations, and because of a technicality in the
law, I believe that the State Department would have a different
view as to whether that applies to them.
Senator LEVIN. Can you give us a recommendation or have you
given us a recommendation on that section as to any need to
strengthen it? Is that one of your recommendations?
Mr. HENKE. It is not specifically in the report. We can certainly
discuss that with you and your staff.
Senator LEVIN. Do you still have enough days left to do that?
Mr. HENKE. Yes.
Senator LEVIN. That would be helpful for you to do that.
Mr. HENKE. Senator, one of the things from the defense authorization bill, you required a new definition of the term inherently
governmental, and 2 weeks ago, OMB published their new definition. Long story short, it lists now for the first time the security
function under an illustrative list of what functions are determined
to be inherently governmental.
Senator LEVIN. That is long overdue. I think I have time maybe
for one more question before my time is up. We had a provision in
the 2007 defense authorization bill, which became an act, which required the Department of Defense to assign a senior executive to
lead program management and contingency contracting efforts during military operations to identify a deployable cadre of experts
with the appropriate tools and authority to staff the efforts to take
specific steps to plan, train, and prepare for such contingency contracting. And I am wondering whether or not the Department of
Defense has implemented the requirements of that section.
Mr. SHAYS. You have some of us here. I do not know.
Ms. SCHINASI. I would just say we found the lack of program
management to be a continuing problem.
Mr. ZAKHEIM. The way the Department has done it is it has some
individuals who have responsibility for this in general in policymaking in the Office of the Secretary of Defense.
Senator LEVIN. Yes, but
Mr. ZAKHEIM. That is very different.
Senator LEVIN. They had to designate specific people under
Mr. ZAKHEIM. We did not find somebody who was so designated,
which is why we made the recommendation that you need somebody, and it has to be somebody at the Assistant Secretary level.
We think it has to be somebody Senate-confirmed.
Senator LEVIN. All right. Did you happen to ask the Department
of Defense why they have not complied with Section 2333 of the
2007 act? Did that question get asked, do you know?
Mr. HENKE. They have taken a number of steps. We believe in
totality they are not enough.
Senator LEVIN. Well, we will ask it. That is for sure. Thank you.
Thank you, Mr. Chairman.
Chairman LIEBERMAN. Thank you. Thanks, Senator Levin.
Senator Carper has gone. Let us do a second round of 6 minutes,
just to encourage us to know it is the second round.
At the end of my first round of questions, I raised the question
of if contractors are cheaper because presumably that is one reason

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why contractors are called on to do these jobs. In fact, the Commission in its final report asked the question and offers the following
answer: It depends. And because it depends on a whole range of
factors, many of them under direct government control, consideration of cost cannot be the driving factor in determining whether
to contract or what to contract.
Mr. SHAYS. Senator, they are cheaper if you use them efficiently.
Chairman LIEBERMAN. Yes.
Mr. SHAYS. They are cheaper if you use three when you only
need three. They are not cheaper when you hire 15 to do the work
of three. They are cheaper when you do not have a contingency
and, therefore, you do not need civil servants to be on the payroll.
So they can be much cheaper, and it is one reason why we use
them. And they can provide outstanding work.
Chairman LIEBERMAN. Right.
Mr. SHAYS. You just have to make sure you use them when you
need them and you do not use too many of them; and then when
you do not need them, you no longer have them.
Chairman LIEBERMAN. So the key here, to say the obvious is how
you manage them.
Mr. ZAKHEIM. It is more than that, Senator.
Chairman LIEBERMAN. Do you want to take issue with the Chairman?
Mr. ZAKHEIM. Not in the least. [Laughter.]
I never did, so I will not now.
Mr. SHAYS. I eat the crumbs off his table.
Mr. ZAKHEIM. All right. No, what I was going to say was point
out that, in addition to that, there is another factor, and it is one
we talked about earlier. One of the reasons that they are cheaper
is we use local nationals. Obviously, a local national is going to be
cheaper.
Chairman LIEBERMAN. Right.
Mr. ZAKHEIM. But then that is where so much of the corruption
problems come in, plus very often we have foundand we reported
on thisthat these people are exploited. This is the abuse side of
the equation. We have talked about waste, we have talked about
fraud. This is the abuse side. So it is both what my esteemed cochairman said
Chairman LIEBERMAN. You mean exploited by us?
Mr. ZAKHEIM. Exploited by their own contractors, by the people
who hire them. And so those guys will be paid next to nothing, and,
of course, contractors are cheaper. So it is both the circumstances
of the environment in which they work, which is what my co-chairman talked about, and the nature of the contracts themselves and
the people who are doing them.
Chairman LIEBERMAN. So part of this, Congressman, if I understand what you are saying, is really how these people are managed.
I know it is making a complicated matter simple, but part of what
you are saying is they can be cheaper if they are well managed.
Mr. SHAYS. Absolutely. And what is really important is that we
have experienced people who know how to oversee contractors even
when we are not using them so that when we then need to use
them, we know how to use them well.

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Chairman LIEBERMAN. So let me get to that. I mentioned in my
opening statement about how some of this is deja vu all over again
and how do we stop it. You probably know this. In 2007, this Committee reported a contracting reform bill. One of its provisions,
which ended up being passed into law in 2008 as part of the Armed
Services Committee bill, the National Defense Authorization Act,
required the Administrator for the General Services Administration
to establish a Contingency Contracting Corps whose members
would be acquisition professionals from across the government who
would be ready to deploy in a contingency, such as Iraq or Afghanistan, or a major disaster such as Hurricane Katrina.
It is an interesting history here, which is that this Contingency
Contracting Corps nominally has been stood up, but they have only
got nine volunteers there now. And now you have come alongand
I welcome it, of coursein your Recommendation 2 and said that
the agency head should develop deployable cadres for acquisition
management and contractor oversight.
So talk to me a little about this because this is one of the great
lessons of Hurricane Katrina and why we have been doing so much
better in responding to natural disasters since thenalthough, we
admit, Hurricane Katrina was catastrophic, but we have had some
pretty serious onesbecause the Federal Emergency Management
Agency particularly and the Department of Homeland Security
generally have developed contingency plans, both people and plans.
So how do we do this with regard to this particular matter? Because these are contingencies, as compared to the ongoing contracting, let us say, in the Department of Homeland Security.
Ms. SCHINASI. Right. We explored this issue in one of our hearings because our thought was this sounds like a good solution to
some of the problems that we were identifying, and the Executive
Branch witness came back and said, Well, it really is not appropriate for an overseas contingency, and this really is not going to
answer the question. And we had the State Departments Office of
the Coordinator of Stabilization and Reconstruction representative
there, which was also to be a deployable civilian-based cadre that
could actually go over and do the work, not just the acquisition
workforce to supervise, but to do the work. The other agencies involved are not forced to put anyone up, and do not.
Chairman LIEBERMAN. Mr. Henke, did you want to add to that?
Mr. HENKE. Yes, sir, if I might. We had a great example of that
issue. The fundamental principle is if you are going to have contractors carrying out parts of your foreign policy where it is appropriate, you had better have vigorous government oversight. An example: The military establishes a Joint Contracting Command in
Iraq and Afghanistan. That is a good step forward. It is about 400
people with a brigadier general in charge of it. General Petraeus
comes in and realizes he wants more contracting oversight, so he
goes back to the services and says, Army, Navy, Air Force, send
me more contracting officers. They say, We are tapped out. We
do not have enough. We have deployed them six times, and we cannot break the force. So one, they failed on getting more military
volunteers, or not enough.

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Two, they ask for civilian volunteers. They cannot find enough.
They wound up staffing up the Contracting Command with contractors to provide oversight of the contracting. Just crazy.
Chairman LIEBERMAN. It is crazy and unacceptable. So I am just
going to continue finally on this line of questioning. So let us go
forward 2, 3, 4 years. Just as all of us want, we have wound down
our involvement in Iraq and Afghanistan. Maybe there is a continuing mutual defense strategic framework agreement with both,
but we do not have too many people there. And then some other
contingency, some other crisis occurs, and we are required to deploy troops and all that they need to support them.
So what do we want in place at that time to make sure in that
new contingency, wherever it is, we do not make the same horrific
mistakes and waste of money as we have repeatedly in previous
contingencies.
Mr. ERVIN. May I start that, Mr. Chairman?
Chairman LIEBERMAN. Yes, sir.
Mr. ERVIN. This whole issue of having a deployable cadre of acquisition professionals is important, no question about it, but it is
only part of the equation. My colleague, Ms. Schinasi, began to
mention this, and we have said it explicitly, but equally important,
it is critical that the government have a choice, and that means
that there needs to be at least a small and expandable organic capacity on the part of these three agencies to perform missions
themselves so the next time there is a contingency the government
has a choice between going with contractors and going in-house,
and the determination can be made whether it is more effective to
do it either way, whether it is cheaper to do it either way.
As we said at the inception, right now the government does not
have an option. Contractors are the default option because they are
the only option.
Chairman LIEBERMAN. Is this something we need to legislate on,
to mandate? Or is this something that you are going to talk to the
Executive Branch about putting into effect?
Mr. SHAYS. You need both. But first, in the Quadrennial Review,
they have to not pay lip service to contingency contracting. It was
hardly mentioned. The greater expenditure is not on things anymore. It is on services. And we have to get people to wake up to
that. You need a J10. So in the military, they treat contracting seriously. You need to key management people, the assistant directors, deputies, to be in all the different departments thinking about
contingency. You need to have a cadre of people who can oversee
contractors, and you need a cadre of people that can go in to do
the work of contractors.
If you do those things and have real competition, we will not
have the same problems that we have had.
Chairman LIEBERMAN. My time is up. I hear you that we should
be working on a legislative package to implement what you are
about, and I can assure you that Senator McCaskill and her Subcommittee, when you go out of business in 7 or 9 days, will try to
take up the oversight of what you have started.
Senator McCaskill, you are next and then Senator Coburn.
Senator MCCASKILL. Thank you, Mr. Chairman. I think also the
place we have to keep this is up, I do not think we can underesti-

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mate thisand I think most of the Commission members will
agree with meis the culture of contracting.
Mr. SHAYS. All of us do.
Senator MCCASKILL. I honestly believe that at the War College,
contracting has to be one of the core competencies. I honestly
believe that our flag officersit is anecdotal, but this is true. It actually happened. A general said to me on one of my contracting
oversight trips, I wanted three kinds of ice cream in the mess hall
yesterday, and I did not care what it cost. They see their mission
as a military mission, and contracting is not something that the
military leaders have seen as part of their mission. Probably when
most of them were trained and they envisioned what they would
be doing later in their careers, they did not realize to what extent
the military would be relying on contracting.
And so I think we have to spend some time questioning in the
Armed Services CommitteeSenator Webb, Senator Collins, Senator Lieberman, Senator Levin, and myself, are all members of the
Armed Services Committee. And if we do not continue to pound the
leadership of the military about contracting, we are going to expect
more of the same.
Let me ask you a couple of things. First let me ask you, it seems
to me on this corps ofby the way, to follow up on your question,
OMB is supposed to be standing up this Contingency Corpsthat
is what our legislation directsand they have fallen down in terms
of doing that. But I am wondering about is: Should we be looking
at the Guard and Reserve in this regard? Here we talk about we
need citizens that can be deployed when necessary. We have a lot
of men and women who are serving in our Reserves and serving
in our National Guard that have core competencies as it relates to
contracting and oversight. Should we not be trying to work with
the Guard and Reserve to try to identify certain units of the Guard
and Reserve that recruit, retain, and maintain a level of competency in terms of being deployable during contingencies as members of the Guard and Reserve? Because these are folks, I mean,
some of them may work as accountants in their jobs that they
serve in as civilians. It is a civilian corps that can wear the uniform and have that kind of stick in a contingency that maybe
would bring more respect to this kind of work. Any thoughts on
that?
Ms. SCHINASI. Some of the success stories that we heard in theater of interagency collaboration on projects and how things worked
really well together often had a Guard or Reserve member as part
of that, and it was because of the domestic experience, if you will,
which they brought, that made the project successful. But it was
almost by happenstance. There was no planning for it. There was
no identification, as you said, of what are the skills that we need
from our National Guard to bring into the agricultural project in
Afghanistan. But where that did happen, we heard many examples
of successful projects on a small level.
Mr. ZAKHEIM. It is also important that the same approachand
you cannot use the Guard in the same wayis taking place at the
State Department and USAID, and we heard about USAID.
Senator MCCASKILL. Right.

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Mr. ZAKHEIM. But, as you see, the State Department is going to
be taking over a lot of the contracting, and what we cannot afford
to let happen is for DOD to clean up its act, as it were, but the
other agencies do not.
One of the concerns that I personally have and we have discussed is, and this goes to Chairman Liebermans question as well:
You have to get those people to go out there. It is not enough to
rely on volunteers. If you are going to rely on volunteers, you are
going to always have a problem.
Senator MCCASKILL. Right. Let me switch, because what you
brought up relates to this, and that is sustainability. As we transition back to the State Department from the Defense Department,
we have really created some precedents in these contingencies that
are unprecedented in our military history, and one of them is this
notion that we now have the military with a reconstruction fund.
That has never happened before in the history of America, and for
the first time this year in the defense budget, there is an Afghanistan reconstruction fund. I am not talking about Commanders
Emergency Response Program (CERP) funds. It is like CERP has
morphed into the military is going to build things, and that is
where this whole sustainability piece comes in. If the military is
making the decision about when to build things, I believe that is
why power plants like Kabul happen. I need specific recommendations that we could put in legislation. What should the requirements be around sustainability? What kind of processes should we
force in place they are claiming now they are doing sustainability
analysis. I do not know if you all found any evidence of that. We
have looked and can find no evidence of real analysis on sustainability. And if the military says they have it somewhere, they can
get it to my office anytime they would like. But I do not believe
sustainability analysis is going on in earnest in most of these decisions that are being made.
Mr. SHAYS. Totally agree.
Senator MCCASKILL. I really need guidance on: Should we be
passing it off to the military in these contingencies to build things,
ever, and then pass it back to USAID? And dont we lose some of
the oversight and sustainability as we do those kinds of things?
And how do we get at this issue that counterinsurgency means we
build health centers, we build power plants, we build highways,
even if the security and the sustainability around those issues are
completely unlikely to ever have to be able to occur?
Ms. SCHINASI. Senator McCaskill, we deal with that in our report
in two ways.
The first is to talk about pushing development, traditional development projects and the USAID on a counterinsurgency timeline.
It just has not worked. So I think your concerns are appropriate
in terms of who is it that should be doing projects and what is their
mind-set in terms of a time frame for that.
The second is we have made recommendationsalthough we do
not have metrics about sustainabilityin one of our special reports
that is contained in the back of this report that says cancel the
projects if you cannot demonstrate that they are going to be sustainable. And, again, you would have to come up with Senator

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Coburns metrics about how are you going to do that. But if you
cannot demonstrate that, cancel them.
Senator MCCASKILL. Should we put something in the law that
says you cannot go forward with a project until there is some kind
of written documentation about a sustainability analysis? This is
going to drive these guys crazy because, of course, they are saying,
well, the whole beauty of the counterinsurgency is how quickly we
can move. I mean, I watched the CERP thing. I started asking
questions about CERP in 2007, and I have watched every year how
it has gotten bigger. We started out with breaking windows and
storefronts, and that is the first year. Well, we are going to fix the
broken windows. Well, the next year, well, we are going to add a
wing on a hospital. The next year, we are building highways. Now
we have a $400 million fund.
Mr. SHAYS. One of the challenges is nobody wants to take ownership.
Senator MCCASKILL. Right.
Mr. SHAYS. And that is one of the reasons why we think we need
to see that structure in place in the military, USAID, and the State
Department, as well.
Mr. ZAKHEIM. There is an element at USAID that we discussed
with Rajiv Shah that is really underrepresented, and it is a small
office called Office of Transition Initiatives. Actually, it is fascinating. The entire office has, I think, only six government personnel. Everybody else is an individual consultant, contractor, or
whatever they want to call them. Those are the only people that
are really geared to the kinds of things you are talking about. This
is my personal view. I think what they ought to do is create something akin to Special Operations Forcesthat is to say, you have
a career path. You can go all the way to the top. You will get your
budget money. You will not compete with the dominant culture,
which is long-term development, but you will have people who now
have a prospect of moving up the ladder and, therefore, will stay.
What we found in Afghanistan was really remarkable. Young
people, actually young women, were going out into these danger
zones, but then we are told, well, you will do this for 3 years, but
then you cannot come into USAID because your contract is up. So
the people who really knew what was going on were the people who
were going to leave. That is weird.
Senator MCCASKILL. That is very weird. Thank you, Mr. Chairman.
Chairman LIEBERMAN. Thank you. Senator Coburn.
Senator COBURN. Thank you. I think Commissioner Zakheim
mentioned culture changes. Well, the Senator from Missouri and
myself have demanded a culture change in DCAA. And I do not
know if we have received it, and I do not know if you have done
any more follow-up hearings on it. But we had a change in the top.
But what we found was no true audit experience in DCAA. In other
words, they did not have any formally trained auditors. It was a
culture that you rose within the agency, but you never had any
outside training, you never had any outside experience in terms of
auditing, in terms of what you have recommended.

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Any other things that you would recommend for DCAA? And
where are they now? And what kind of job are they doing in terms
of what your observations were in your study?
Mr. SHAYS. Well, it is too bad my co-chairman is not here because he would love to speak on this issue. The one thing that we
did mention is if you have a $600 million backlog of bills paid but
not audited, think of the records that people have to keep, and we
pay them to keep those records. We pay tens of millions of dollars
for people to keep records that we then are going to audit 6 or 7
years later. So one thing is they need more people. They need, as
Senator McCaskill points out and you point out, well-trained people. They clearly need more people to get at this backlog.
Senator COBURN. All right. One other question, and then I will
end, Mr. Chairman. I was on Louis Berger Groups rear end for the
incompetency, 3 or 4 years ago. Did you find out why somebody can
get fined $70 million and still continue to contract?
Mr. SHAYS. Go for it, Mr. Tiefer.
Mr. TIEFER. Yes, we looked into that a little.
Senator COBURN. Can you give a plausible, common-sense explanation so that the average American can understand when somebody has actually cheated us and been fined that we would continue to use that contractor when they have demonstrated that
they are not competent, one, and two is that they actually overbilled us?
Mr. TIEFER. Well, I would say the answer in a few words is very
good criminal defense lawyers for the company, that is how they
are able to do it. Louis Bergers criminal defense lawyers worked
out with USAID that they promised that they would be good and
they would have a monitor who would look them over and make
sure they were improving, and in return USAID would agree that
they would not get one day of suspension.
You might say, why would USAID make this deal? They love
what they call their development partners. They love them too
much to let go of them. They did not want merely to do without
Berger for a day. They did not want to do without contracting new
contracts with Berger for one day. And so a crucial opportunity to
send the signal was flubbed.
We had hearings where we questioned USAID. I think two different hearings we raised this issue, and they stood by it, and the
technique that was worked out with those criminal defense lawyers, the type of plea agreement that was done unfortunately looks
like it is going to be a model for the future.
Senator COBURN. So why would we as the Congress not hold
whoever made that decision at USAID accountable for the American people?
Mr. SHAYS. I think at the very least you want to call them in for
a hearing and question them quite extensively. That is how you
would hold them accountable.
Mr. ZAKHEIM. By the way, the former Finance Minister of Afghanistan, who still advises the president and is in charge of a variety of things there, goes absolutely ballistic when you mention
Louis Berger, precisely for that reason. So it not only is a matter
of cheating American taxpayers, it is a matter of undermining our
credibility with the government we have to work with over there.

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Senator COBURN. Did you see any other examples similar to that
with other contractors that we could learn from, or who should
have been disbarred or at least suspended that were not?
Mr. ZAKHEIM. That was the extreme example because they
Senator COBURN. That is the five-star.
Mr. ZAKHEIM. Louis Berger is the biggest defrauder in the contingency area. Nobody got up to the numbers for criminal fraud
that they did.
Having said that, what we found is that there is great difficulty
bringing suspension and debarment cases against companies for
what happens in Afghanistan because it is hard to get witnesses
together, people rotate out. There are people from other countries
who are part of the allied effort who you cannot possibly get a hold
of and so forth. And so what we did is we put some recommendations for making it possible just in contingencies to have it easier
to do suspensions and debarments.
The need for this was shown even more recently than our report,
the test case to see whether you could do a successful suspension
and debarment through the normal full-scale hearing in the United
States. The Wardak Risk Group ended up virtually in a win by the
company. So you do have to make it easier to do these proceedings,
or they will not happen.
Senator COBURN. So that would be a recommendation that we
should be doing.
Mr. ZAKHEIM. Yes, it is. It is one of the written recommendations
in the report.
Senator COBURN. All right. Thank you, Mr. Chairman.
Chairman LIEBERMAN. Thank you, Senator Coburn.
Thanks very much to the Commission members. Congressman
Shays, do you have a final word?
Mr. SHAYS. If you would allow me to thank personally Senator
McCaskill and Senator Webb on behalf of the full Committee, and
Senator Collins, and to you, Senator Lieberman, because you have
shown tremendous interest through the course of our nearly 212plus years. I would say that all of us would tell you it was a privilege to have this opportunity, and we really appreciate your interest. It is nice to be on this side and be on the friendly side of you,
Senator McCaskill. [Laughter.]
Chairman LIEBERMAN. That is very gracious of you. Thank you,
Congressman Shays. Thank you for your service. I recall that at
the beginning Senator McCaskill said that your services were being
sought by many, and she was very glad that you agreed to take on
this co-chairmanship. Knowing that the Commission expires in a
week or so, I just hope you can find some way to continue to keep
busy and perhaps stay involved in public service. [Laughter.]
Mr. SHAYS. Thank you, Senator.
Chairman LIEBERMAN. I thank all the members of the Commission very much for your public service.
We will call now on the representatives of the Defense Department and the State Department.
The witnesses are Hon. Patrick Kennedy, Under Secretary for
Management at the Department of State, and Richard Ginman, the
Director for Defense Procurement and Acquisition Policy at the Department of Defense.

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Thanks to both of you for being here and listening to the testimony. Obviously, we are interested in your reaction to the Commissions report and what your respective departments intend to do
about it. Obviously, if you disagree with any parts of it, we would
welcome that as well. Thank you for your public service, too.
Mr. Kennedy, I guess we will begin with you.
TESTIMONY OF HON. PATRICK F. KENNEDY,1 UNDER
SECRETARY FOR MANAGEMENT, U.S. DEPARTMENT OF STATE

Mr. KENNEDY. Thank you very much, Mr. Chairman and Senator
McCaskill. I have a longer statement that I would ask be made
part of the record, and I will synopsize it to leave more time for
questions.
Chairman LIEBERMAN. Without objection.
Mr. KENNEDY. Thank you for inviting me today to discuss the
Commission on Wartime Contractings final report and the steps
the State Department has taken, and continues to take, to improve
contingency contracting.
The State Department has been working with the Commission
since 2008, gaining valuable insight. Our ongoing dialogue has
been very beneficial in improving our contracting functions. We
fully agree that contracting is a critical function that must have
full Department support.
State has increased oversight and made numerous improvements
to our contracting program. We mandated up-front planning for
contract administration and major programs. We increased the
number of contracting officer representatives assigned in the field
in Iraq and Afghanistan. On major acquisitions, the State Department has increased the competition and the number of awardees.
The State Department has actively engaged with the Office of Federal Procurement Policy on preparing the policy letter on inherently governmental performance. The State Department is working
with the Departments Inspector General to strengthen the suspension and debarment process, and State and USAID place considerable emphasis on sustainability as part of the planning and execution of all our programs and projects. My written testimony provides details on these improvements in the context of the CWCs
recommendations, so I will only highlight these few.
The State Department appreciates the Commissions list of risk
factors when deciding whether to contract in contingency situations. We consider these factors when evaluating whether to use
contractor support. In Iraq and Afghanistan, we primarily contract
to provide life support, security services, and aviation support,
which allows us to carry out our core diplomatic and consular missions. We do not believe that these support contracts have resulted
in a loss of our organic capability.
The State Department has a long history of using contract
guards for protection of our facilities and personnel overseas. Private security contractors are also critical to our capability to carry
out U.S. foreign policy under dangerous and uncertain security conditions. Maintaining this capability is particularly important when
the Department is expanding its mission in locations that are
1 The

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emerging from periods of intense conflict, as in Iraq and Afghanistan.
We have sought to reduce risks through robust oversight of our
security. Contractors are overseen and contractually managed by
direct hire State Department personnel. We have instituted cultural training and behavioral standards, and when private security
contractors have acted inappropriately or not performed as required, we have taken serious corrective action.
The Baghdad and Kabul guard forces, like other guards, serve as
our first line of defense for facilities and staff, but they differ from
our typical guards in other locations in the world. They have higher recruiting, screening, and training requirements; a higher percentage of American and third-country national personnel; and possess specialized weapons and equipment to counter the extreme
threats in those countries.
The recent terrorist attacks in Kabul illustrate the critical need
for a robust security program, including properly equipped and
trained contract security personnel who are operationally overseen
by direct hire members of States Diplomatic Security Service and
act in concert with host nation security forces. During the Kabul
embassy attack, the embassys security elements acted swiftly to
protect embassy staff and Afghan visitors, moved them to safe locations, assumed defensive positions, and took defensive actions as
directed by the Chief of Mission.
Increased oversight of security contractors is an area where
CWCs recommendations have been particularly helpful. We have
instituted operational measures and direct oversight of security
contractors by the Bureau of Diplomatic Security (DS). Their actions for management oversight and operational control of security
contractors include, among others: DS special agents at each post
in Iraq and Afghanistan serving as managers for the Static Guard
and Personal Protective Security programs; DS special agents at
each post serve as contracting officers representatives for the direct management and oversight of the Worldwide Protective Services contract; video recording and tracking systems in vehicles enhance oversight and contractor accountability; and all radio transmissions are recorded in Iraq.
State experiences, obviously, as you well know, Senators, continuous contingency requirements around the world, and our U.S.
Government contracting staff is experienced with these situations.
The Commission recommends a deployable cadre of acquisition professionals so that the U.S. Government will not rely on contractors
for acquisition management oversight. The State Department does
not use contractors for these functions. Only U.S. Government staff
provide contracting management and oversight. We use contractor
staff only for administrative support in those areas. When contingency contracting is needed, the State Department deploys experienced contracting personnel from Washington or our regional offices and surges other resources to specific contingency operations.
Through internal funding mechanisms, a 1-percent fee that we
charge ourselves on each contract, the Department is able to draw
upon its own resources, and we have hired 102 additional staff over
the past several years. State centralizes procurement operations in
the Office of Acquisitions Management in Washington and its sub-

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ordinate regional procurement offices around the world, staffed by
government employees. We have found this to be an effective model
in contingency operations not only in Iraq and Afghanistan but also
in Haiti after the earthquake and Japan after the earthquake and
tsunami.
The State Department does not see a separate contingency contracting cadre as efficient as it would not avail itself of the experience we already have on hand and have developed. The Assistant
Secretary of Administration has a professional acquisition staff
that can handle up to $9 billion in contracting a year. The Department continues to take steps to improve and elevate the status of
its contracting program.
In 2010, Secretary Hillary Clinton issued the Quadrennial Diplomacy and Development Review (QDDR), which promotes American
civilian power to advance our national interests and be a better
partner with DOD. The QDDR calls for a new bureau to deal with
conflict prevention and stabilization, which will assess needs for
contingency resources.
One of the QDDRs key outcomes is working smarter to deliver
resources better, including managing contracting to achieve our
mission more efficiently and effectively. As we have begun to implement the QDDR, we have created a Contracting Officer Representative Award, and a first awardee has already been selected.
In April, we provided guidance on critical work elements to be
included in performance appraisals for both contracting officer representatives and government technical monitors. And, in addition,
we require that for every service contract with expenditures exceeding $25 million a year, the Assistant Secretary of the relevant
bureau certify that appropriate resources have been identified to
manage the contract.
State will continue to improve our contracting oversight and
management because we know that there is more to be done. We
believe our current organizational structure is the most effective
way to do that, and we currently have a senior officer whose nomination is pending before the U.S. Senate to be the Assistant Secretary of State for Administration, and we look forward to her
quick confirmation.
Thank you again for inviting me to discuss this report, Senators,
and I look forward to your questions. Thank you, Mr. Chairman.
Chairman LIEBERMAN. Thank you, Mr. Kennedy. That was very
interesting testimony. I look forward to the questioning.
Mr. Ginman, thanks for being here. Please proceed.
TESTIMONY OF RICHARD T. GINMAN,1 DIRECTOR, DEFENSE
PROCUREMENT AND ACQUISITION POLICY, U.S. DEPARTMENT OF DEFENSE

Mr. GINMAN. Chairman Lieberman and Senator McCaskill, good


afternoon. I welcome this opportunity to report to you on the Departments assessment of the Commission on Wartime Contracting
final report. I commend the Commission on the work it has done
to identify problems in wartime contracting and in recommending
solutions to those problems. I have read all of the Commissions re1 The

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ports and believe they have identified many real and important
problems.
Like the Commission, the Department is dedicated to solving the
issues behind each of the DOD-specific recommendations in its
final report, and we agree in principle with the issues they raise.
In todays opening statement, I will provide you an overview of the
Departments preliminary reaction to the 11 DOD-specific recommendations. There are nine that we embrace.
First, using risk factors in deciding whether to contract in contingencies, which is their Recommendation 1;
Developing deployable cadres for acquisition management and
contract oversight, their Recommendation 2;
Phasing out the use of private security contractors for certain
functions and improving interagency coordination and guidance for
using security contractors in contingency operations, their Recommendations 3 and 4;
Taking actions to mitigate the threat of additional waste from
unsustainability, their Recommendation 5;
Setting and meeting annual increases in competition goals for
contingency contracts, their Recommendation 10;
Improving contractor performance data and use, 11;
Strengthening enforcement tools, 12;
And, finally, providing the adequate staffing and resources and
establishing procedures to protect their interests, 13.
While we agree with the concern raised with two other DOD-specific recommendations, we envision a different approach to addressing the challenge. The Commission raises a concern with institutionalizing acquisition as a core function. This is embodied in the
Commissions two recommendations to elevate the positions and expand authority to civilian officials, and to elevate the positions and
expand authority of the military officials at the Joint Staff combatant commanders in the military services. Respectively, they are
Recommendations 6 and 7.
From DODs perspective, for true cultural change we need all of
the leaders in planning for and management of contractors, both on
and off the battlefield, to be knowledgeable. We do not believe consolidation in a single organization is the answer.
I would like to highlight a few of the DOD-specific recommendations, in particular the Commissions Recommendation 2, to develop a deployable cadre for acquisition management and contracting oversight. We support this recommendation to grow a
trained, experienced, and deployable workforce, and the Department is taking steps to implement it. The Under Secretary of Defense for Acquisition, Technology, and Logistics is working with
both the military services and the defense agencies to support
these enduring requirements for contingency operations. Thanks to
Congress, the Department has 10 new additional general and flag
officer billets. The Department has filled nine of those. These military leaders will ensure continued attention to the need for a
deployable acquisition personnel.
Further, the Army established the Expeditionary Contracting
Command following a recommendation in 2007 from what has been
called the Gansler Commission, and that organization is led
today by Brigadier General Joe Bass.

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Finally, the Department has some concerns with details within
the 11 DOD-specific recommendations. The Department raised its
concerns with the Commission when these same recommendations
appeared in the second interim report. In these areas, we have a
professional difference of opinion on the best way to proceed. While
we support Recommendation 12 to strengthen enforcement tools,
we do not believe this should include publishing a suspension and
debarment officials rationale to not suspend or debar in the government-wide past performance database. In the second interim report, the Commission included such a recommendation. I believe
that it is inappropriate to include information when the suspension
and debarment found no grounds to either suspend or debar. I do
believe that if it was based on poor performance, that should be
adequately defined and supported within the past performance
databases.
I might add the Department has increased the use of suspension
and debarments. Army suspension and debarment actions have increased 52 percent from 342 in 2007 to 519 so far in 2011. We have
consistently advocated the policy that debarring and suspending officials need discretion to treat each case on its own merits.
As further evidence of the commitment to strengthen enforcement tools, the Department has strongly supported two Senate
bills in this area: One would expand the governments access to
records in an overseas environment, and the other provides authority for DOD to avoid a contract or a subcontract if its funds directly
or indirectly support the enemy.
In closing, we are still in the process of fully assessing all of the
recommendations, particularly those that did not appear in a previous report. Recommendation 5 to take actions to mitigate the
threat of additional waste from unsustainability does fall in this
category. We believe this to be a significant recommendation since
it is very forward looking.
We agree with the Commission that any fraud or waste is unacceptable and are analyzing the proposed way forward to address
that challenge. The Department is determined to identify, correct,
and prevent contracting efforts not in consonance with U.S. objectives in both Iraq and Afghanistan and that are wasteful of U.S.
taxpayer dollars. These areas were a specific concern to the Commission, and we will continue to carry the torch to ensure improvements in the way forward for addressing contracting challenges in
Iraq and Afghanistan.
This concludes my remarks, and I would ask that my longer
statement be entered in the record.
Chairman LIEBERMAN. Without objection, and I thank you, Mr.
Ginman.
We will do a 7-minute round of questions.
Just so I am clear myself, do I understand that the way you look
at the report, 11 of the recommendations are related to DOD and
you accept 9 of them?
Mr. GINMAN. Well, we accept all 11 and believe that two6 and
7that go expressly to elevating the positions, both the civilian positions and the military positions, we believe there is an alternative
approach. From my perspective, I think military leaders in J2, J3,
J1, J4, J7, all of whom are engaged in employing contractors on the

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battlefield, need to be knowledgeable and experienced, and creating
a J10 organization that allows it to be deflected so it is not part
of their responsibility I do not think is appropriate.
I think Mr. Zakheim mentioned a cultural change, and I know
that Senator McCaskill mentioned the training, particularly at the
senior level. I would say that we need training not only at the senior level at the National Defense University; we need it at the junior officer level, the mid-grade level, and the senior level. Since contractors are going to be a presence in our future conflicts, we need
all of the people that are engaged in that to be knowledgeable, understand it, and do it. So it is not that we do not
Chairman LIEBERMAN. I agree.
Mr. Kennedy, let me ask you if you would apply the same metric
to the report. Do you accept all the recommendations related to the
State Department?
Mr. KENNEDY. We accept the predicate that there never should
be a case when a dollar of taxpayer money should not be appropriately managed. We believe that the predicates they have outlined addressed to the State Department should be met. We believe, however, sir, that we are meeting some of those already. The
volumetric difference between the size of the State Department and
how it deploys in contingency operations versus the size of the Department of Defense means that we would implement the predicate
of the Commissions recommendations, but might do it in a better
and more efficient way given our own size and our own thrust.
Chairman LIEBERMAN. Let me ask you a short question that
could probably lead to long answers, but try to limit them, if you
can.
Looking back at the areas covered by the Commission, contracting in Iraq and Afghanistan, would you say that we used contractors too much or the right amount? Mr. Ginman, do you want
to start?
Mr. GINMAN. I think that is a very difficult question to answer.
The Chairman of the Joint Chiefs, 2 years ago, raised a concern
that we were, in fact, overrelying on contractors.
He kicked off a study to look at expressly where we were overreliant on contractors and had gone too far. When that was finished, Secretary Robert Gates, in January 2011, issued a letter to
the services, to the chairman, and asked some very specific questions. The services are continuing to look at that, and we have not
had feedback or reports from the services on whether they believe
that they have overrelied or not.
Chairman LIEBERMAN. So was there a conclusion to the question
that the chairman originally asked?
Mr. GINMAN. When they did it, they had high dependence in logistics and building partnerships, in corporate management and
support, and in the net-centric area.
Chairman LIEBERMAN. Too high?
Mr. GINMAN. They described it as high dependence. The chairman has basically asked the services to now take a look at what
we found and make a determination where you think you are and
what you need to do.
Chairman LIEBERMAN. Mr. Kennedy, what about the State Department as you look back?

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Mr. KENNEDY. As we look back, Mr. Chairman, in direct answer
to your question, I believe that the Secretary in her Quadrennial
Diplomacy and Development Review has identified that, when we
do police training, rule-of-law training, which we have done extensively in Iraq and Afghanistan, we need to partner with other U.S.
Government agencies and deploy more U.S. Government subject
matter experts who are from within the various elements of the
U.S. Government. So I think on that aspect we wouldand we are,
right now in both Iraq and Afghanistan, recasting our efforts to use
more U.S. Government experts there. But in security, aviation, and
life support, we believe the balance is correct.
One codicil: I think we have learned a lesson that we have to deploy more contracting officers representatives, U.S. Government
employees, for oversight of those contracts in the field.
Chairman LIEBERMAN. Right. So you would say in that one area
probably too much reliance on contractors, in the others probably
not.
Mr. KENNEDY. Not, sir.
Chairman LIEBERMAN. Helpful answers.
The Commission has said in its report that it believes future
waste resulting from the inability of the Iraqis and Afghanis to sustain projects will be as big as the waste that the Commission attributes to poor planning and oversightin other words, the high
numbers, $30 to $60 billion.
I wanted to ask you for your reaction to that prediction and, really more to the point, your reaction to the Commissions assertion,
and that it sees no indication that the Defense Department, the
State Department, and USAID are making adequate plans to ensure that host nations will be able to operate and maintain U.S.funded projects on their own. So that is a worry. That may not be
U.S. taxpayer dollars operating them, but obviously it is U.S. taxpayer dollars that made the investment.
Mr. KENNEDY. Senator, that is an exactly broad but absolutely
correct question. I believe that my colleagues in USAID and my colleagues in the State Department who do law enforcement and ruleof-law training are engaged with their respective partners in Afghanistan and Iraq. It is a question that was raised earlier. The
gross national product of Afghanistan is not very large. It is a
country with extreme potential. But until we build up a base there,
until we build up their economic capabilities, it is a question about
whether or not they can sustain them. However, unless we give
them the roads, the hospitals, the schools that they can then grow
their economy, we would be in a perpetual negative loop.
And so I think we are doing what we can. I think our partners
are doing what they can. Should they do more? Will we try to get
them to do more? Absolutely, sir.
Chairman LIEBERMAN. Mr. Ginman, how would you answer that?
Mr. GINMAN. It is clearly an important question. I would say that
we documented in the fall of 2010, a requirement for all of our construction contracts to go through at 16 different no-go definitions,
one of which is expressly to look at sustainability and whether the
project can be sustained for the long haul. I know that Senator
McCaskill asked earlier, could people provide documentation.
Chairman LIEBERMAN. Right.

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Mr. GINMAN. Since October 2010, where we are, in fact, looking
at sustainability and the corps has asked that, my presumption
will be that the files will document that we, in fact, looked at sustainability.
Chairman LIEBERMAN. That is a great transition. Time is up on
my side. Senator McCaskill.
Senator MCCASKILL. Thank you. Let me follow up with that.
Can you identify for me who would have made the decision to
build the power plant in Kabul?
Mr. GINMAN. I am sorry. I do not know the answer to that.
Senator MCCASKILL. Would you see if you could get that for my
office?
Mr. GINMAN. We will do that.
INFORMATION SUBMITTED FOR THE RECORD
The Departments understanding is that a decision was made in 2007 by the Administration, per the request of the Government of the Islamic Republic of Afghanistan (GIROA), to proceed with the power plant in Kabul, which was implemented
by the U.S. Agency for International Development.

Senator MCCASKILL. And we are going to hold a hearing on Afghanistan in Armed Services tomorrow, and my line of questioningI hate to show my hand because that means there will be
14 people working tonight somewhere harder than they should. But
I need to know who made this decision and what were they thinking. How do you build a $300 million facility without checking to
see if the country can afford to operate it and if there is an alternative that is cheaper?
And, by the way, I am using this as an example, but if somebody
says that example is not fair, I got five or six other ones that immediately come to mind that could also be used as examples. And
I am trying to figure out why the reality of the situation is not
matching up. And this notion that you are going to do better about
when our money is going to the bad guys, I do not know how you
are going to do that in Afghanistan. And if you know how you are
going to do that, you need to let the folks over there know because
I do not think they know how to do that.
Mr. GINMAN. It was either Senator Levin or Senator Lieberman
who asked a question earlier about the task force. The task force
that was especially set up to do that is Task Force 2010, led by
Brigadier General Ross Ridge. One of the commissioners mentioned
the $360 million number. That was expressly out of Task Force
2010 where they have looked at $30 billion worth of contracts and
they have looked at $1.5 billion in actual cash transactions flowing
through the financial system in Afghanistan. That is where we are
attempting to do it.
They are also the organization that is helping us with vetting
contractors beforehand so that we can make better choices with to
whom we are awarding the contracts. It is a challenge.
Senator MCCASKILL. Especially when we are trying to keep our
contractors from getting killed, because we are paying off the bad
guys to provide some level of security for the projects that are ongoing. Once again it seems to me that is something we should calculate in the sustainability question. If we cannot build it without

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paying the bad guys to keep our contractors from getting shot, then
why are we building it?
Mr. GINMAN. One of the other 16 elements is to look at are we
in a safe environment and can we protect where it is at.
Senator MCCASKILL. I am sure, Mr. Kennedy, you might have expected this, but, obviously, as a former auditor, nothing is more
frustrating than when somebody you are auditing tells you, Well,
you cannot have a record because part of what you may want is
relevant to you, but part of it may not be part of your auditing jurisdiction. It is another auditor that has jurisdiction over that. So,
therefore, we are not going to give it to you. And, of course, I am
referencing your letter to Stuart Bowen, SIGIR, that was this summer, saying that you thought because they were asking for documents that dealt with something outside the reconstruction area,
since this was security contracts, that somehow it overlapped with
the diplomatic function and, therefore, you did not think you could
give those documents.
Would it be helpful if I asked for the same documents and then
gave them to Stuart Bowen?
Mr. KENNEDY. We always try to be responsive, Senator, to the
Congress, but if I could take a couple of seconds to explain that.
We receive oversight in our activities around the world by the
Government Accountability Office, who you yourself described in
your opening statement as the eyes and ears of this Committee.
We also have the State Departments Inspector General who looks
at all the activities of the State Department and has a special office
forward-deployed in the region for oversight of our activities in Iraq
and Afghanistan, as does the Government Accountability Office
have office and bed space in both locations.
Ever since Mr. Bowens office was established, they have been
auditing the reconstruction efforts in Iraq and Afghanistan, and we
have cooperated with him and provided him information that he
has asked for. He recently asked to inspect the security platform
that the State Department provides for U.S. Government civilian
employees and the same security platform that we provide around
the world for U.S. Government employees. And we said to him, as
I said in the letter, that this is an activity that is part of the jurisdiction of the Government Accountability Office or the State Departments Inspector General. This is not inherently part of the reconstruction activities.
We are cooperating fully with Stuart Bowen, and I personally
have met with Stuart Bowen and made sure that he has gotten everything he needs to inspect his reconstruction mandate. But when
he moves to inspect other activities of the State Department that
are the province of someone else, it does raise a question about jurisdiction.
Senator MCCASKILL. And I get that. I understand the point you
are making. It is just you have to understand when you tell an
auditor they cannot look at something, that is the proverbial red
cape when you do that. And so we will go down this road and figure out what is the information that has been requested and who
needs to ask for it.
Maybe this is a good time to say perhaps it would be better to
have a Special IG with broad and complete jurisdiction over all ac-

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tivities for contingencies that would touchyes, there is an Inspector General at the State Department, and they have done some
great work. GAO does some great work. But this Congress also decided we also needed reconstruction auditing, which, of course, I
think was obvious and remains obvious.
In fact I have gotten pushback on this subject from your IG and
from some of the other IGs that we should not have a Special IG
for contingencies. What is your view? Do you think it would be
good to have a standing Inspector General with expertise that
would look at everything in a contingency, including reconstruction,
since reconstruction is part of the military mission?
Mr. KENNEDY. Well, I cannot address the military mission, but
let me address any activity that is carried on by the State Department, and I believe that it is more appropriate and best use of the
taxpayers dollar to have that done by entities that are extant, that
work with the State Department every day, who know our mission,
who know how to read our books, and who can act quickly. And I
believe that, therefore, no, a Special IG is not necessary. I believe
that the competence and the expertise, for example, of the International Division of the Government Accountability Office and of
the State Departments Inspector General, or the Inspector General
of the Agency for International Development when you are in the
foreign assistance arena, are much more appropriate, much more
targeted, much more knowledgeable than, as the Commission said
a small cadre of people who would somehow expandthey never do
explain where these other auditors are coming from.
Therefore, I have no idea to be able to answer your question in
a more full sense, Senator. Where are these auditors coming from?
What is their expertise in international affairs or in auditing in
these overseas activities when you have the International Division
of the Government Accountability Office, backed up by their full
range of expertise and the full range of either the Inspector General of the State Department or the Inspector General of the Agency for International Development? It seems one too many.
Senator MCCASKILL. Well, I do not think there is ever too many
auditors, and I do not think it is one too many because, I mean,
I am not sure that we need the Special IG, but I do know this:
That the notion that we do not complement and/or augment IGs
when we are talking about the kind of money we are spending in
contingencies, particularly as it relates to security and reconstruction and logistics, that what has happened in thisand if you have
dug down like this Commission did, if you have spent the time at
this that I have you know that there is so muchI mean, figuring
out who is it that decided to build that power plant that wasted
$300 million of taxpayer money? Was USAID in the room? Did the
military make that call? It is hard for me to believe the USAID was
not in the room.
So we have these cross-jurisdictions here that require somebody
to be able to come in that is looking at the big picture. And I guess,
I do not think anybody else has asked for the documents that
SIGIR asked for. No one else is doing this investigation. This is not
duplicative. And I think that we have to look at how we get the
documents to SIGIR that they have requested. I do not think that
they are making requests that are unreasonable or unfair because

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security is part of reconstruction. You just heard me ask Mr.
Ginman that security, as it relates to the ability to do reconstruction, is one of the sustainability tests.
Mr. KENNEDY. But that is not, Senator, what Mr. Bowen was
asking for from the State Department. He was asking for the documents related to the contracts where the State Department protects its own people or protects other civilian employees. He was
not asking for documents related to contractors security. He was
asking for the
Senator MCCASKILL. Is there a security reason that you do not
want this out?
Mr. KENNEDY. No.
Senator MCCASKILL. OK.
Mr. KENNEDY. We will be glad to send it up to your staffthere
is a long list of reports that our Inspector General has done on
State Department activities in Iraq, including on security, as well
as the Government Accountability Office. So it is a matter that has
been widely looked at. And I am not attempting to hide anything.
To be blunt, I have the Government Accountability Office looking
at my work, and I welcome that. I have the State Departments Inspector General looking at my work, and I welcome that. But there
is a limitation of how much time I can pull people off the line, so
to speak, to answer questions from still another Inspector General.
And why not the Inspector General of the Agriculture Department,
whose people I protect, or the Inspector General from the Department of Commerce, whose people I protect?
Senator MCCASKILL. I guess the answer to your question is that
I do not think you get to make that call. I do not think that is your
job. I think the job is for you to respond to requests that are legally
made. If this is not a legally made request, then you do not have
to respond to it. I respect that. And we will get to the bottom of
it and hopefully work together and figure out if this is a legally
made request.
But if Congress devises this oversight and they are there and
they legally have the ability to look at you, then you do not get to
say no just because you have too many. I think that is the bottom
line. But if this is not a legally made request, if they do not have
jurisdiction, I will be the first to take your side of it, and then I
will probably ask you for the documents.
Mr. KENNEDY. And I will be glad to come up, Senator, and meet
with you at any time to discuss why I believe it is outside their jurisdiction.
Senator MCCASKILL. We will definitely follow up with you. We
will definitely follow up with your staff, and thank you both very
much.
Mr. KENNEDY. I am always at your disposal.
Senator MCCASKILL. Well, I do not know about that. You do not
want to take too many people off the line now. [Laughter.]
Thank you very much.
Mr. KENNEDY. I will find the time for you, Senator.
Chairman LIEBERMAN. Thank you. This may not have been a
grand bargain, but it was a grand discussion and a grand debate,
and I thank you for it.

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I have just a few more questions, and then we will let you go.
One is very recent and direct, Under Secretary Kennedy, which is
that obviously we know our embassy in Kabul was attacked recently. I am curious whether that has led to any re-evaluation of
the role of private security at the embassy, or do you feel that they
performed, from what you know nowI know it was recentadequately in that situation?
Mr. KENNEDY. Mr. Chairman, we have looked into this extensively. We have been in contact with the State Departments regional security officer, the Diplomatic Security Service senior representative on the ground, as well as with the Ambassador. The
contract security personnel operating under the direction of the
Diplomatic Security U.S. Government officials operated superbly.
When the attack began, they moved personnel into safe locations,
they took up defensive positions, and they were prepared to engage
in any appropriate defensive act should the insurgents have moved
on the compound. Instead, the insurgents did stay off in the upper
floors of another building and fired upon us, and from time to time,
under regional security officer direction, we did return fire on specific targets.
We think that is the right way to go, Senator. We think there
must be a balance between contract security personnel and then
strong oversight by Diplomatic Security Federal special agents
overseeing them.
I have a cadre of 1,800 Diplomatic Security special agents for the
entire world, all our activities in the United States to combat passport and visa fraud, protection of distinguished foreign visitors, and
then 285-some diplomatic and consular operations around the
world, many of which you visited. I do not have a government
cadre. We even ran some numbers of looking at other government
agencies from whom we could borrow personnel. If I had to replace
all my security contractors in Iraq and Afghanistan with U.S. Government employees, I do not think there would be anyone left to
administer Federal law enforcement.
Chairman LIEBERMAN. I hear you. One, I am glad that your review of the performance of the private security guards when the
embassy in Kabul was attacked has led to a positive result. That
is encouraging.
Two, my own experience with the security at the embassies that
I visit as I travel around, particularly in Afghanistan and Iraq, is
really quite high.
Mr. Kennedy, you said something in your testimony that was
really intriguing to me, and I want to just ask you to flesh it out
a little bit, which is this 1-percent fee, if I understand it correctly,
charged on all contracting services to fund contract management.
Are you charging the contractors? Are you sort of taking it off the
top of what they otherwise would be paid? How does that work?
Mr. KENNEDY. If I could, Senator, when I came back to the State
Department in 2007 from being on loan as the Deputy Director of
Management at the Office of the Director of National Intelligence,
I sat down and met with my colleagues and saw that there had
been significant growth in the State Departments demand for contracting services. But because of budgetary and other constraints,
the level of professionals in our Office of Acquisitions had not

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grown concomitantly, and I saw that was a train wreck we were
heading for.
I consulted my lawyers, my own expertise of 30 or more years
with the government, with the Office of Management and Budget,
and with our oversight committees. We have an authority in the
State Department called the Working Capital Fund. This is a feefor-service authority, somewhat akin to the Industrial Fund that
the Department of Defense uses for some activities. I then said in
order to make sure that I can issue, analyze, execute, and administer contracts appropriately, I am going to charge the ordering officethe Bureau of Diplomatic Security, the Bureau of Consular
Affairsa 1-percent fee for every contract that they put forward to
the Office of Acquisitions. And then I moved all the people in Acquisitions under the Working Capital Fund.
Now, as their workload grows or decreases, they have the resources that parallel the volume of their work, which is why I believe, in sort of a further answer to one of your earlier questions,
that we do not need a Contingency Contracting Cops because I, in
effect, have created that already within the State Department.
Should our workload grow, I have the resources to bring in additional personnel.
Chairman LIEBERMAN. Just to make it clear. Is that money coming from money that would otherwise be paid to the contractors?
Or is it coming from funds appropriated to those particular offices?
Mr. KENNEDY. Funds appropriated to those particular offices, sir.
That way the contract, there is no chance of the contractor influencing it. This money is paid in when you ask for a contract to be
worked on long before the contract is ever issued.
Chairman LIEBERMAN. And I presume that the offices or agencies
you are taxing are not appealing?
Mr. KENNEDY. No, sir. This has been in effect for over 3 years
now, and they are actually very pleased with this, for two reasons:
First, there is not a long and pending queue of acquisitions to be
done because of the growth of demand and the lack of supply of my
professional contracting colleagues; and, second, this creates a partnership where the Bureau of Administrations Office of Acquisitions
has the personnel in Washington to do contract administration in
partnership with the contracting bureaus overseas representatives.
So it makes for efficiency and effectiveness. I do not have a single
protest. In fact, it is much welcomed.
Chairman LIEBERMAN. Mr. Ginman, so talk to me a bit about
because you accepted Recommendation 2, you said, about developing a deployable cadre of contract management experts. Does
such a thing exist now in the Defense Department?
Mr. GINMAN. I will step back to the 2006 time frame when Army
Secretary Peter Geren asked Dr. Jacques Gansler to form a committee and look at it. Their recommendation was, particularly for
the Army, that there needed to be a deployable cadre. The Army
stood up in 2009 the Army Acquisition Command, and one of those
organizations was called the Expeditionary Contracting Command.
Chairman LIEBERMAN. This was civilian?
Mr. GINMAN. The Expeditionary Contracting Command has both
military and civilian personnel, and it is principally military. It
was first headed by Brigadier General Camille Nichols, now headed

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by Brigadier General Joe Bass. The Army has grown from, I want
to say, in 2007 from about 250 military contracting officers, they
have more than doubled that number. Today, it is roughly 550 military contracting officers. I can get the exact numbers.
INFORMATION SUBMITTED FOR THE RECORD
In 2007, there were 240 authorized Army military contracting officers (known as
career field 51C); in 2012, there are 583, which is a 143 percent increase of
deployable personnel. These active-duty 51C military officer positions are located
within the Army Expeditionary Contracting Command.

Chairman LIEBERMAN. Are they a mix of active Guard and Reserve?


Mr. GINMAN. They are active. They are a mix of officer and enlisted. There are currently six brigades that are developed. There
is a seventh that is now being staffed and manned that will principally support the Africa Command mission. Somebody mentioned
Haiti earlier. When Haiti took place, the Expeditionary Contracting
Command literally within 24 hours had one of their deployed units
in the theater to be able to do the contracting.
The Air Force, frankly, has provided the vast majority of our
military contracting officers in Iraq and Afghanistan, so the Armys
increase is welcome by the Air Force. It allows them to step back
the number of people they need to provide.
Chairman LIEBERMAN. How about the Navy and the Marines?
Mr. GINMAN. Well, the Navy, by and large, since they deploy
from a ships perspective, does not have a major contingency force.
They do have the Seabees, and each of the Seabee units has a contracting capability within it.
The Marine Corps 4 years ago completely revamped the way it
thought through military contracting officers, revamped their training program, put it into a 16-week program, 8 weeks for an enlisted and then a rotational experience, and then another 8 weeks
later the officers go through for 16 weeks. It is very focused to, in
fact, get the level that they need so that they can support each of
the deployable units.
The Marine Corps now in Afghanistan gives operational control
of their contracting organization over to the Joint Contracting
Command that is in theater.
Chairman LIEBERMAN. So to rephrase the question I asked the
Commission members when they were here, we are winding down
in Iraq and Afghanistan. We will negotiate with the stand-up governments of both countries the extent to which we have troops continuing there. Say it is 2015, 2016; another overseas contingency
operation arises. Are you confident that the Department of Defense
and the Department of State will be more prepared to oversee private contracting in that contingency than we had at the beginning
of Iraq and Afghanistan?
Mr. GINMAN. I am comfortable that we will. We spent 2 years
looking atwe used, I want to say, October 2008 as the baseline
for the actual level we had in Iraq and Afghanistan and went
through a major effort from what they call adaptive planning on
the personnel side to say where we are with people. That effort is
working through the Joint Staff, the J1, the personnel crowd, to ensure that we have the resources established there.

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The question as we go forward certainly in the budget style
where we are in is what is the level of risk we are going to go? It
is on the table in a discussion. I do think from a cultural perspective that the senior military leadership, non-contracting officers
now understand the importance of the overall management of contractors on the battlefield. I think the Chairman of the Joint Chiefs
has embraced it, the Joint Staff has embraced it. General Kathleen
Gainey, who just left her J4, certainly understood it. The Director
of the Joint Staff issued a letter 4 or 5 months ago assigning very
specific responsibilities to each of the Joint Staffs and what their
responsibilities were.
So I think as we go forward and in the development that we have
done in what we call operational contract support and the documentation, we have made significant strides over the last 2 or 3
years, and we are continuing to make that. So I think if I fast-forward another 3 or 4 years, will we be much better prepared? Yes,
we will.
Chairman LIEBERMAN. Good. Would you consider implementing
in the Department of Defense this 1-percent fee or something like
it that the Secretary talked about?
Mr. GINMAN. We have activities today that are Working Capital
Fund. There are contracting offices that, in fact, charge a fee. I
headed, when I was on active duty, the contracting office at the
Naval Sea Systems Command. We were mission funded, so we
were given the number of people that was needed.
My personal philosophy would be if your principal person who
was going to provide you money is the organization that you are
part of, you should be mission funded. In fact, if I take the Defense
Information Systems Agency, where they are getting requirements
from a great many other agencies and they are coming in, then
they do exactly what the State Department is doing. And as the
money comes from the Army, Navy, or Air Force, there is a fee
charged. Some are as low as a half a percent. I think I have seen
fees up to 1.5 percent. They are different. But, by and large, I
would expect most organizations to be mission funded. In those organizations where you have a broad breadth of people bringing
money to you, for them to then mission fund that level, not knowing for sure, I think to Mr. Kennedys point, it becomes fungible
and you can flex up and down. That is an important capability to
have.
Chairman LIEBERMAN. Fine. Ready in 2016 for a contingency?
Mr. KENNEDY. Mr. Chairman, I believe so. As I mentioned earlier, in the last 3 years we have hired 102 additional contracting
personnel, both professionals and support professionals, to engage
in our activities. I think we can flex up because of our fee-for-service.
I could note that when we had the earthquake in Haiti in 2010,
our Regional Support Center for Latin America, which is based in
Fort Lauderdale, Florida, supported them immediately. I had already had a contracting officer in Benghazi when the U.S. first
staffed up during the conflict in Libya. And right now, or at least
recently, there was another officer who especially was more focused
on real estate activities, to bring the right real estate under contract already on the ground in Tripoli.

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Chairman LIEBERMAN. Well done.
Mr. KENNEDY. So we believe that we are prepared, Mr. Chairman.
Chairman LIEBERMAN. Good. I thank you both for your testimony. I thank you for your positive reaction to the Commissions
report. To the best that we are able, we are going to try to continue
to monitor this because it is so important.
Senator McCaskills ad hoc Subcommittee on Contracting Oversight will take the lead for our Committee both in oversight and
in bringing forward a legislative package based on the Commissions report. And, of course, I am sure that the Foreign Relations
Committee and the Armed Services Committee will, too. But we
will do it because we have broad jurisdictional responsibility across
the entire government, and this problem of oversight and management of contracting obviously is not limited to the Departments of
State and Defense in wartime, although the numbers there, of
course, are very large.
I thank you both for your continuing public service. I appreciate
it a lot. It has been a good hearing. I think we have learned a lot,
and I think we have a sense of mission about what we can do with
you to make sure we do not repeat mistakes that we have made
in the past.
The record of the hearing will be held open for 15 days for any
additional questions or statements.
With that, I thank you again and adjourn the hearing.
[Whereupon, at 5:05 p.m., the Committee was adjourned.]

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